ACCOUNTING INFORMATION SYSTEMS
Data Analytics: AMPS Model Approach
The AMPS Model
1-The AMPS Model: Ask the Question
“Your Data Won’t Speak Unless You Ask It the Right
Questions.”
The AMPS model starts with asking questions that can be
addressed with data and that lead to a better decision
making.
Potential questions include:
• Which product is most profitable at stores in Missouri?
• Is it more profitable to produce an item in the United
States or in Mexico (or Indonesia)?
• Why are our costs increasing in the West but decreasing
in the East?
• What is the probability that our audit client will go bankrupt or need to restate its financial
statements?
2-The AMPS Model: Master the Data
Data questions include:
• Data Accessibility – can we get the needed data to answer the question posed?
• Data Reliability – is the data clean?
• Data Integrity – is the data accurate, valid and consistent over time?
• Data Type – is the data structured? is the data internal? are there privacy concerns with the data?
3-The AMPS Model: Perform the Analysis
The Type of Question Asked Leads to the Analysis Performed
1. What Happened? – Descriptive Analysis
2. Why Did it Happen? – Diagnostic Analysis
3. Will it Happen in the Future? – Predictive Analysis
4. What Should We Do, Based on What We Expect Will Happen? – Prescriptive Analysis
Descriptive Analysis: Analysis performed that characterizes, summarizes, and organizes past
performance. Addresses questions like:
1. Did we make a profit last year?
2. How much did we pay in federal taxes last year?
3. How long have the existing accounts receivable been past due?
Diagnostic Analysis: Analysis performed to investigate the underlying cause of a phenomenon.
Addresses questions like:
1. Why did advertising expense increase, but sales fall?
2. Why did we experience an unfavorable labor rate variance last year?
ACCOUNTING INFORMATION SYSTEMS
Data Analytics: AMPS Model Approach
3. Why did overall tax increase even though net income did not?
Predictive Analysis: Analysis performed to provide foresight by identifying patterns in
historical data. Addresses questions like:
1. What is the chance the company will go bankrupt?
2. What is our expected sales and income next year?
3. Can we predict if the financial statements will be misstated?
4. Will the borrower pay us back the loan we’ve granted her?
Prescriptive Analysis: Analysis performed which identifies the best possible options given
constraints or changing conditions. Addresses questions like:
1. What is the level of sales needed to breakeven?
2. How can revenues to maximized if there is a trade war with China?
3. Should the company lease or buy its headquarters office?
4. Should the company make its own products or outsource production to another company?
4-The AMPS Model: Share the Story
Communicating the findings to the decision maker (potentially answering the questions asked in the
analysis) using data visualizations.
Data Visualization
• The process of presenting information graphically
• One way of sharing the story and turning data into information
• Presenting relevant information to decision makers
Steps to Creating Well-Designed Visualizations:
1. Understand the data (ETL)
2. Select the right data visualization tool (i.e. Excel, Power BI, Tableau, iWork, Google charts,
IBM Watson Analytics, R, Python, SPSS, SAS, Stata)
3. Select the right visualization with the decision maker in mind (see Table 11.1 in text and
Appendix A for suggestions)
• Choose the right chart for the information.
• Use color, text, etc. to direct user to most important info.
• Use explanatory titles
• Properly label the x-axis and y-axis.
• Choose delivery method (in-person, electronic, etc.)
ACCOUNTING INFORMATION SYSTEMS
Data Analytics: AMPS Model Approach
Summary
• The abundance of data availability gives new opportunities to analyze and assess data in a way
that helps business makers make decisions. We call this process data analytics.
• Data analytics will increasingly be critical for business in general and for accounting and auditing
in particular.
• The AMPS model is a means of thinking about the data analytics process.
• The four types of analytics performed include descriptive, diagnostic, predictive and prescriptive
analytics.
