Which of the following best describes the use of predictive analytics?
A.
A supplier of electrical parts analyzed an instances where different types of spare parts were out of stock prior to scheduled deliveries of those parts.
B.
A supplier of electrical parts analyzed sales, applied assumptions related to weather conditions, and identified locations where stock levels would decrease more quickly.
C.
A supplier of electrical parts analyzed all instances of a part being, out of stock poor to its scheduled delivery date and discovered that increases in sales of that part consistently correlated with stormy weather.
D.
A supplier of electrical parts analyzed sales and stock information and modelled different scenarios for making decisions on stock reordering and delivery
Predictive analytics involves using historical data, statistical algorithms, and machine learning techniques to forecast future trends and behaviors.
It applies assumptions and models patterns to predict outcomes, helping businesses make proactive decisions.
Why Option B is Correct:
Predictive analytics is forward-looking and uses assumptions (e.g., weather conditions) to predict where stock levels would decrease more quickly.
This aligns with the goal of predictive analytics: forecasting potential events before they occur.
Why Other Options Are Incorrect:
A. Analyzed instances where parts were out of stock before scheduled deliveries: This is descriptive analytics, as it looks at past data without making future predictions.
C. Analyzed past stockouts and found a correlation with stormy weather: This is diagnostic analytics, as it identifies past correlations but does not predict future trends.
D. Modeled different scenarios for stock reordering and delivery decisions: This is prescriptive analytics, which focuses on decision-making rather than predictions.
IIA Standards and References:
IIA GTAG on Data Analytics (2017): Highlights predictive analytics as a tool for forecasting risks and operational inefficiencies.
IIA Standard 1220 – Due Professional Care: Encourages auditors to use analytical techniques to anticipate potential issues.
COSO ERM Framework: Supports the use of predictive models to improve risk management and strategic planning.
Thus, the correct answer is B: A supplier of electrical parts analyzed sales, applied assumptions related to weather conditions, and identified locations where stock levels would decrease more quickly.
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