The Need For Skeptical' Accountants in The Era of Big Data PDF

Journal of Accounting Education 38 (2017) 63–80
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Journal of Accounting Education

journal homepage: www.elsevier.com/locate/jaccedu
Teaching and educational notes
The need for ‘skeptical’ accountants in the era of Big Data

Earl McKinney Jr a,⇑, Charles J. Yoos II b, Ken Snead a
a
Department of Accounting and MIS, Bowling Green State University, Bowling Green, OH 43403, USA
b
School of Business Administration, Fort Lewis College, Durango, CO 81301, USA
a r t i c l e i n f o a b s t r a c t
Article history: Big Data is now readily available for analysis, and analysts trained to conduct effective
Received 25 June 2016 analysis in this area are in high demand. However, there is a dearth of discussion in the
Received in revised form 23 December 2016 literature related to identifying the important cognitive skills required for accountants to
Accepted 24 December 2016
conduct effective Big Data analysis. Here we argue that accountants need to approach
Available online 4 January 2017
Big Data analysis as informed skeptics, being ever ready to challenge the analysis by asking
good questions in appropriate topical areas. These areas include understanding the limits
Keywords:
of measurement and representation, the subjectiveness of insight, the challenges of
Big Data
Analysis
statistics and integrating data sets, and the effects of underdetermination and inductive
Informed skepticism reasoning. Accordingly, we develop a framework and an illustrative example to facilitate
Questioning the training of accounting students to become informed skeptics in the era of Big Data
by explaining the conceptual relevance of each of the topical areas to Big Data analysis.
In addition, example questions are identified that accountants conducting Big Data analysis
should be asking regarding each topic. Further, for each topic, references to additional
resources are provided that students can access to learn more about effectively conducting
Big Data analysis.
Ó 2017 Elsevier Ltd. All rights reserved.
1. Introduction
Big Data is characterized by three attributes: velocity, variety and volume (Laney, 2001), and results from two trends:
plummeting cost of storage, and innovative means to analyze and interpret data. These trends have led to exponentially
increasing amounts of data, as every 48 h, as much data is created as was from the dawn of civilization to 2003 (Siegler,
2010). As a result, Big Data is changing business (McAfee, Brynjolfsson, Davenport, Patil, & Barton, 2012) as well as ushering
in a new era for global commerce (Shah, Horne, & Capellá, 2012). That said, the changes needed to accounting education to
better prepare students to effectively utilize Big Data are just beginning to emerge. This paper seeks to help students
understand the need to approach Big Data analyses with the mindset of a ‘skeptical’ accountant.
This paper’s motivation stems from the growing availability of Big Data and how this is shifting professionals’ expecta-
tions of the students they hire. Not only are Big Data skills such as database analyses, visualization creation, and tool selec-
tion required, graduates are increasingly expected to be able to apply higher order thinking skills to related analyses. Shah
et al. (2012) called these Big Data higher order skills Big Judgment. We suggest a key aspect of this Big Judgment is the ability
to adopt an attitude of skepticism by recognizing the need to ask good questions throughout the analyses. To this end, we
identify and classify a preliminary set of seven topical areas, and related questions, into a framework suitable for accounting
⇑ Corresponding author.
E-mail addresses: emckinn@bgsu.edu (E. McKinney Jr), yoos_c@fortlewis.edu (C.J. Yoos II), ksnead@bgsu.edu (K. Snead).
http://dx.doi.org/10.1016/j.jaccedu.2016.12.007
0748-5751/Ó 2017 Elsevier Ltd. All rights reserved.
64 E. McKinney Jr et al. / Journal of Accounting Education 38 (2017) 63–80
educational purposes. These topics are technology independent and emerge from a deeper awareness of the assumptions
that support Big Data analyses. We expect this list to grow and become more refined in coming years. We incorporated
the topics in our senior level/masters level courses on Big Data—courses outside of the traditional accounting curriculum.
Employers persuaded us to include them as they found many new hires were naïve about important assumptions on which
analysis rests; these new hires, aptly labeled unquestioning empiricists, put too much trust in analysis over judgment (Shah
et al., 2012). As a result, we added these questioning topics to the existing subjects of technology and statistics within our
business intelligence courses.
The paper is organized as follows. We first outline the broad impact of Big Data on accounting and education and then
explain why accounting education needs to produce informed skeptics for this era of Big Data. The learning outcomes
and criteria for our topics are presented next, followed by a presentation of the seven topics. Then, an illustrative example
is presented and referred to throughout the discussion of the seven topics. Conclusions and limitations of the paper follow.
2. Big Data, business and accounting
The broad impacts of Big Data on the business environment are technical, managerial and social in nature. They include
how technologies should be selected, how to reasonably limit the scope of an analysis, how to examine the tradeoff of pri-
vacy and security, how to address cultural biases in analyses, and how to address the challenges of privilege and digital
divides (Boyd & Crawford, 2011; Chan & Kogan, 2016). Other issues include ownership of data, and compliance and security
(Gantz & Reinsel, 2012; Kaisler, Mondy, & Coen, 2012). Ritchey (2005) highlights the Big Data management challenge of
structuring socially messy problems that come with incomplete, contradictory and changing requirements. More specific
to accounting, Big Data fundamentally changes how accounting data are understood and reported (Griffin & Wright,
2015). Warren, Moffitt, and Byrnes (2015) claim that Big Data gives firms new opportunities to identify behaviors correlated
with goal outcomes and the ability to formulate, store and analyze new performance measures. They also suggest Big Data
will give firms new opportunities to use external data such as social media sentiment in forecasts. McKinney, Yoos, Green,
and Heppard (submitted for publication) suggest Big Data will create a new consumer driven demand for accounting data
that is atomized, reconfigurable and transparent. A noteworthy concern is the current slow pace of accounting in making
adjustments to meet this new demand (Griffin & Wright, 2015).
These impacts on the business and accounting environment are changing business education (Coyne, Coyne, & Walker,
2016). Most of the suggested changes to educational objectives involve analytical and IT skills, including how to design
queries and data structures, how to prepare data for analysis, how to use statistical and other analytical tools, and how to
create and share visualizations (Chen, Chiang, & Storey, 2012; Kaisler, Armour, Espinosa, & Money, 2013). Further, Lazer,
Kennedy, King, and Vespignani (2014) highlights the need for business students to understand construct validity, scaling
limitations, and reliability and dependencies among data. As noted, Shah et al. (2012) believe business education should pro-
duce students who can also exercise the Big Judgment necessary to appropriately analyze Big Data. In their view, a decision
maker with Big Judgment skills possesses a healthy and informed skepticism that can assess the factors underpinning the
numbers and think critically about the assumptions behind the data. While these informed skeptics have been shown to
improve a wide range of metrics across a variety of business functions, they are relatively few in number; helping more stu-
dents become informed skeptics should not be left to broad educational changes or to technology courses (Shah et al., 2012).
We agree—accounting education also has a role to play in training students to become informed skeptics. While there have
been many calls for modifications in accounting education over the past 30 years in response to changes in the financial envi-
ronment and technology (AAA, 1986; AECC, 1990; Albrecht & Sack, 2000), the presence of Big Data will likely require more
significant changes than ever before, as we can expect an increase in both analytical skills and database skills being added to
accounting curriculum. Finally, not only is Big Data changing how accounting education will be performed, it will also have
an impact on who will analyze the data, given one of the characteristics of Big Data tools is self-service (Gantz & Reinsel,
2012; Lycett, 2013). Krahel and Titera (2015) believe that Big Data will result in more analyses being done by accountants
rather than data analysts; however, Yoon, Hoogduin, and Zhang (2015) suggest that there will not be enough trained
accounting analysts to audit all the available data.
3. The importance of asking good questions in the era of Big Data
Given the emphasis on data analytics, we suggest accounting education should train students to ask good questions. This
training of higher order thinking skills is consistent with a number of recent directives by accounting education agencies
such as the Accounting Education Task Force, the Pathways Commission, and the Association for the Advancement of
Collegiate Schools of Business (AACSB). Two findings of the Accounting Education Task Force report (Lawson et al., 2015)
are particularly germane to our proposal. First, the task force calls for accounting education to better prepare students for
long-term career demands and reduce emphasis on first job skills. Second, accounting education objectives should reflect
how accountants add organizational value. We believe the ability to ask good questions is a long-term career skill particu-
larly useful to organizational value. Accounting graduates that can ask good questions can improve the quality of their
collaboration and the value of analyses, and hence, long-term value.
E. McKinney Jr et al. / Journal of Accounting Education 38 (2017) 63–80 65
The Pathways Commission calls for graduates to comprehend emerging Information Systems (IS) technologies and to be
able to employ quantitative methods and draw appropriate insights from an analysis. The ability to ask good questions helps
students qualify the insights generated by Big Data analyses. The Pathways Commission also calls for accounting education
to be integrated with other business subjects (Behn et al., 2012). By training students to use questioning skills, accounting
education becomes more integrated with business subjects such as analysis, measurement, representation, IS, and qualita-
tive reasoning. Finally, a recent AACSB accounting accreditation change (Standard A7) calls for more learning experiences
with IS in accounting (AACSB, 2014). By learning to question Big Data analysis, students will be learning to use and evaluate
interpretations from current IS systems.
The value of asking good questions has been demonstrated in a variety of critical thinking studies (Bonk & Smith, 1998);
accounting education manuscripts have called for greater emphasis on training accounting students to think critically for
decades (Baril, Cunningham, Fordham, Gardner, & Wolcott, 1998; Bonk & Smith, 1998; Finley & Waymire, 2013). Critical
thinking has a number of definitions, most of which share common elements such as the ability to work on unstructured
and unfamiliar problems, the acquisition and evaluation of information and knowledge (McPherson, 1996), the ability to
apply rationality and logical thinking to organizational problems, and to examine unstated assumptions (Kimmel, 1995;
Kurfiss, 1988; Scriven & Paul, 1987). While critical thinking in general would improve Big Data analyses, here we focus
on one aspect of critical thinking—asking good questions. While our call for training in the area of questioning skills in
the Big Data arena is, as far as we know, the first in accounting, Boyd and Crawford (2011) in the social science domain also
call for critically interrogating the assumptions and biases behind Big Data. However, most of their insights are directed at
social science issues such as privacy and inequality and do not address aspects of business analyses.
In the absence of an accepted framework or model that would identify key questions for Big Data analysis, we adopted
and modified a model based on semiotics—the study of signs, their significance, and the important role of interpretation
(Peirce, 1907). Semiotics is an appropriate theoretical framework for accounting and analysis as it a general account of all
signs, how signs become linked to objects they represent, and how they are interpreted by particular individuals. On the
semiotic view, accounting produces signs—financial numbers, categories and entries are all signs (Boland, 1993). A sign, also
called a signifier, can be the mark on the page or the act of speech; the object is what is signified, the thing, concept or idea
that the sign refers to. Semiotics has been used elsewhere in accounting literature (Boland & Schultze, 1996; McGoun,
Bettner, & Coyne, 2007) and in our work on information theory (McKinney & Yoos, 2010). In this paper we treat data as signs
and use semiotics to better understand how that data creates unique meaning for each individual. We took the basic outline
of semiotics—creation of a sign, affixing a sign to an object and interpreting that sign—and derived our first three topics that
help identify the assumptions made at each step. We initially used these three in class and subsequently this semiotic
foundation grew to the seven topics presented based on feedback from graduate students, executive training participants,
and conference reviewers and attendees. Throughout this process we maintained the same set of criteria for identifying
useful topics.
4. Learning outcomes
Since a key objective of this study is to improve accounting education and better prepare accounting students, we frame
our questions by a set of learning outcomes that we currently use. For simplicity, they are written here as they would appear
in a syllabus or class exercise.
1. Understand the Difficulties of Effective Analysis. Students often under appreciate the assumptions made in conducting an
analysis.
2. Understand the Limits of Analysis. Students typically overstate the certainty of the results of analysis. For example, com-
mon expressions such as ‘‘the analysis proves” or ‘‘the numbers speak for themselves” indicate far greater confidence in
analysis than is warranted.
3. Flourish in Uncertainty. Most students assume the intellectual posture that problems have a finite or given amount of
information and that analysis leads to right answers. Many academic exercises reinforce this—read a case study and
use the ‘‘information” available to make a decision. In contrast, business decisions involve managing uncertainty and
the overwhelming amount of potential data available, and recognizing all analyses of the data have limitations. Our
educational outcome wants students to appreciate the value of uncertainty in actual business contexts, and the limits
it places on confidence in the results of one’s analysis.
4. Understand the Value of Curiosity. Analytical insight is a creative effort, fueled by curiosity. When students quit being
curious about the data, their ability to conduct informed and skeptical analyses is in jeopardy.
5. Consider Other Data Sources. Students need to be conditioned to ‘‘think outside the box” and not to limit analyses to
traditionally available data, but instead, be willing to become aware of other potential sources of data that may have
relevance.
6. Consider Other Approaches to the Analysis. Students need to be made aware of heuristic-based decision making biases (e.g.,
anchoring, status quo, sunk cost, confirming evidence) presented by Hammond, Keeney, and Raiffa (1998) when conduct-
ing analyses. Using alternate approaches to the analyses with other data sources noted above, would assist in mitigating
the effect of these biases.
7. Evaluate the Costs/Benefits of the Analysis. Given the magnitude of Big Data available, students must be trained to be ever
aware of the cost/benefit tradeoff of revising, expanding, stopping, and perhaps even abandoning the analysis.
5. Criteria for our topics
Given the plethora of topics related to Big Data that would potentially generate good questions, we imposed criteria our
selected topics must meet in order to be included in the framework. These criteria reduced the number of topics discussed to
seven.
First, each topic should be applicable to most Big Data applications in any business context. Second, each topic is tech-
nology agnostic, which permits a focus only on higher order questioning skills that can be applied to any technology. Third,
each topic addresses the higher level educational objectives of evaluate and create (Anderson & Krathwohl, 2001; Bloom,
1956). Fourth, no topic requires advanced knowledge or practice. We eliminated other topics that require a technical back-
ground or more training in communication or visualization techniques.
6. Topics
The seven topics are summarized in Table 1. We provide an illustrative example, describe each topic in turn and include
within each topic a reference to the illustrative example, where to read more about the topic, and examples of questions.
These seven topics are placed within three phases that follow the analytical flow of a general information process model,
from measurements that constitute data to interpretation conceived from those data to combining and analyzing the data
to generating results and explaining them.
6.1. Illustrative example
The example in Tables 2 and 3 present a situation common to managers—assessing the economic viability of various pro-
duct lines. The focus of this example is intentionally on managerial accounting, as much of the recent literature discussing
the implications of Big Data for accounting have emphasized impacts on financial accounting and auditing (see Griffin &
Wright, 2015 for a good overview). That said, references will also be made to the financial accounting and auditing implica-
tions in the ensuing discussion of the seven topics, as well as in the classroom Implementation Guidance section.
The Scio Division of Georgetown, Inc. manufactures and sells four related product lines. Each product is produced at one
or more of the three manufacturing plants of the division. Following is a product-line profitability statement for the recent
year ended December 31 that shows a loss for the Baseball Equipment line (BBE). A similar loss for this line is projected for
next year.
Baseball equipment is manufactured in the Evanston Plant. Some football equipment and all miscellaneous sports items
also are processed through this plant. A few of the miscellaneous items are manufactured, and the remainder are purchased
for resale. The items purchased for resale are recorded as materials in the records. A separate production line is used to pro-
duce the products of each product line. The following schedule presents the costs incurred at the Evanston Plant this past
year. Inventories at the end of the year were substantially identical to those at the beginning of the year.
The management of Georgetown, Inc. has requested a profitability study of the Baseball Equipment (BBE) line to deter-
mine if the line should be discontinued. [note: ‘‘unquestioning empiricists” would suggest the above is sufficient to conclude the
line should be dropped].
In addition to the financial data, Georgetown has purchased data from two Big Data sources. The marketing department
has generated a sentiment analysis score from social media of 0.7, a new low. BBE has also purchased data about sourcing
suppliers that is unstructured text—including published financial analyst recommendations, litigation or various forms of
Table 1
Seven questioning topics for big data in accounting education.
Data and interpretation

1. Evaluate and enumerate the assumptions which were made in selecting and interpreting measurements. Assess their reliability and overall value,
seek better measures if feasible
2. Understand and enumerate the assumptions which were made by individuals when they affix a sign (or measure) to an object to create an
interpretation. Evaluate the suitability of the sign for the object, determine if other sign-object combinations are better
3. Be able to evaluate the extent to which a given representation is unique to each individual. Be able to identify where these intersubjective
differences are significant or unnoticed and be able to use these differences in an informative way
Combining and analyzing
4. Be able to identify potential differences in databases that have been combined in this analysis, the types of transformations used to integrate
them, and the assumptions and possible errors that result
5. Be aware of common statistical errors, be able to critique the misapplication of statistics to Big Data databases, and be able to describe limitations
of statistical analysis
Results and explanations
7. Be able to explain induction and the limits it creates for analytics
Table 2
Georgetown Inc product line profitability YTD December (000’s omitted).
Football equipment Baseball equipment Hockey equipment Misc. sports items Total
Sales $2200 $1000 $1500 $500 $5200
Cost of goods sold
Material $400 $175 $300 $90 $965
Labor and variable overhead $800 $400 $600 $60 $1860
Fixed overhead $350 $275 $100 $50 $775
Total cost of goods sold $1550 $850 $1000 $200 $3600
Gross profit $650 $150 $500 $300 $1600
Selling expense
Variable $440 $200 $300 $100 $1040
Fixed $100 $50 $100 $50 $300
Corporate administration expenses $48 $24 $36 $12 $120
Total selling and admin. expenses $588 $274 $436 $162 $1460
Profit contribution $62 $ (124) $64 $138 $140
Table 3
Evanston plant costs-past year (000’s omitted).
Football equipment Baseball equipment Misc. sports items Total

Direct material $100 $175 $90 $365
Direct labor $100 $200 $30 $330
Variable m/o
Supplies $85 $60 $12 $157
Power $50 $110 $7 $167
Other $15 $30 $11 $56
Total variable o’hd $150 $200 $30 $380
Fixed m/o
Supervision $25 $30 $21 $76
Depreciation $40 $115 $14 $169
Plant rentals $35 $105 $10 $150
Other $20 $25 $5 $50
Total fixed m/o $120 $275 $50 $445
Total plant costs $470 $850 $200 $1520
insolvency protection and media comments—in order to generate advanced warning of suppliers’ financial distress. This
measure is called the supplier risk analysis score. A similar risk analysis score was obtained for customers.
In the presentation of the seven topics that follow, the constructs embodied by the topic will be explained and then
related to the BBE example. Big Data implications for the topic will be discussed followed by a listing of questions that
informed skeptics should consider asking. Each topic discussion concludes with a listing of additional resources students
can access.
6.2. Evaluate and enumerate the assumptions which were made in selecting and interpreting measurements. Assess their reliability
and overall value, seek better measures if feasible
Big Data analysis starts with measurement and the assumptions underlying all measurements are typically underappre-
ciated (Stonebraker & Hong, 2012). Measurements travel well—they are easy to create, store and transmit and they enjoy
wide acceptance. The importance of measurement is evident in the adage ‘‘You can’t manage what you can’t measure”
(McAfee et al., 2012). However, every measurement requires assumptions and these assumptions are often overlooked.
Measurement is the process of assigning numbers or other symbols to things and typically assigns numbers to represent
magnitudes of pre-existing quantities. While text, dimensions, and other non-quantitative measures can be used in Big Data
analysis, much of the data are quantitative measures.
Several distinctions about measurement are important to understand since each requires different assumptions. Not all of
these distinctions can be presented in a limited article; here we will discuss three to raise general awareness. First, measures
are either direct (also called fundamental) or indirect (or derived). This direct/indirect distinction should not be confused
with direct and indirect accounting methods. A direct measurement means an attribute of an object can be inspected imme-
diately, for example you can actually pick it up and measure the sides, such as a box, or count items, such as an inventory. An
indirect measure is something like the volume of a rock, where you need a procedure or technique to measure it, like drop-
ping a rock in a container with water, to determine how much the water rises. Surveys, test results, assessments of invoices
and subjective ratings are examples of indirect procedures in business. The procedure for creating an indirect measure intro-
duces assumptions, often overlooked, including how a survey was constructed, how ratings were combined, how non-
responses were measured, and why a particular procedure for inputting data on an invoice was selected.
A second distinction classifies measures as either real or abstract. A real measure represents a physical attribute of an
object such as size or weight. An abstract measure is not related to a physical property, but is an abstraction such as depre-
ciation, correlation, or rank. As with indirect measures, abstract measures introduce assumptions that are often taken for
granted, such as why a method to calculate depreciation was chosen, how correlation was tested, or why a particular
response scale was chosen.
A third distinction arises from the classic taxonomy of measurement levels: nominal, ordinal, interval and ratio (for addi-
tional background see: Frankfort-Nachmias & Nachmias, 2007; Stevens, 2012; Velleman & Wilkinson, 1993). Each level
encompasses all prior levels; i.e. ordinal is also nominal, interval is also ordinal and nominal, and ratio is also interval, ordinal
and nominal. Nominal measures express ‘‘names” or ‘‘labels” only—these may be expressed in numerals as well as other
symbols, but only ‘‘counts/frequencies” and modes may be reported. Ordinal measures provide further information regard-
ing the order of preferences which may be numerically ranked—but only modes and medians can be reported. Interval mea-
sures assume the ability to quantify distances between points on a scale, permitting their addition, subtraction, and
descriptive measures for central tendency and variation to be reported. Given the popularity of the use of interval measures
for surveys via Likert scales, the assumption that true interval measurement has been achieved is often glossed over. For
example, Likert responses of ‘‘strongly-agree,” ‘‘agree,” and ‘‘neutral” may be assigned scores of 2, 1, and 0 respectively,
but is it valid to assume a sample average of 1.5 is half-way between agree and strongly agree? Finally, ratio measures
are considered the ultimate measure since they include a ‘‘true” zero point, permitting further mathematical computations
of multiplication and division. This notion of a true zero point is illustrated by the Kelvin temperature scale, which includes a
true zero point representing the absence of molecular motion.
Most accounting tasks require the application of measures for decision making. For example, a capital investment deci-
sion may require indirect and abstract measures of sales, operating costs, required inventory levels, and the tax implications
of depreciation. To conduct the analysis, the accountant must be familiar with the assumptions underlying the procedures to
create each of these measures and why those measures were chosen.
6.2.1. Measurement implications at BBE

In the Baseball Equipment (BBE) example, accounting procedures have produced all the measures shown in Tables 2 and
3. As with virtually all financial measures, these measures are indirect, there is nothing to pick up and measure directly, and
they are abstract, there are very few physical attributes being measured. For example, one key sign is the $124 loss of the
baseball line. The procedure used to compute that sign is incomplete without additional reconciliation (see Appendix A).
As Table 4 in Appendix A illustrates, this more accurate estimate shows that if the baseball line is closed the company will
lose $131 each year. A skeptical accountant should ask questions about the procedures and assumptions behind the num-
bers, in this case, what assumptions were made to allocate administration expenses, how costs were distributed across pro-
duct lines, and how reliable is variable expense.
BBE should also question the supplier risk analysis score. This measure, created from the unstructured documents in a Big
Data database, is both indirect and abstract. Analysts at BBE should examine the procedure used to generate the measure,
determine why that procedure was chosen, and evaluate other assumptions that were necessary to create the measure.
6.2.2. Big Data implications on measurement

Beyond BBE, individuals often ignore measurement assumptions and the limitations they introduce into Big Data analysis.
While questions about measures have always applied to routine data, the variety and novelty of data used in Big Data anal-
ysis, implies new data is being created and with new data, new scrutiny about how the measures were created is required.
Unfortunately, even the most widely read Big Data proponents seem to overlook the big measurement assumptions and lim-
itations behind Big Data and confidently assert, ‘‘We can measure and therefore manage more precisely than ever before”
(McAfee et al., 2012). This naive view is echoed by Chris Anderson, CEO of Wired magazine, who suggests that with the
new volume of data today, measures can tell us all we need to know. According to this view, we should simply throw the
numbers into the biggest computing clusters the world has ever seen and let algorithms find patterns. Accordingly, it is with
this topic that we remind accountants and analysts that all measures, in Big Data analysis or routine analysis, include
assumptions about measurements and choices about how and what to measure, that must not be overlooked.
6.2.3. Questions to ask
1. What indirect and direct measures are available, and what is explicitly known about the measurement (who did it, how
was it done, what instrument/technology was used, how was it manipulated)? What assumptions were made, and what
unknowns can be investigated for better understanding? What about the measurement may never be known, and what
level of uncertainty or loss of value results from this unknowability and uncertainty?
2. Identify and classify all measures. Which are direct measures? Was the most direct, explicit, reliable measure used (if not,
what would it have been)? Which are abstract measures? What type of abstraction was used and what loss of resolution
and reliability results (i.e. what type of error or uncertainty was, or might have been, introduced)? For each measure:
What is the value and reliability of this measure?
3. Based on a priori knowledge of the goal for this data analysis, list alternative measures which could add value (select these
based on the known goals, and decisions to be made).
4. Measurements of individuals (surveys, analysis of feedback, comments, etc.) are always indirect and often abstract. Eval-
uate the procedure used to generate the measure, why that procedure was used, and how these choices impact the reli-
ability and usefulness of the measure. Further, determine if the individuals measured were aware of how they were being
assessed and evaluate how this Hawthorne effect might impact the usefulness of the measurement.
5. Measures are not the phenomenon or object being measured; they reflect, objectify or interpret some aspect of the object.
Is the measurement of the attribute being mistaken for the inherent object itself?
6. Explain which assumptions can be tested or validated. Once validated, can they still be useful and reliable – to what
degree was the needed, desired or intended measurement level satisfied? What can be done to improve the validity of
measurements?
6.2.4. Read more
1. For a good introduction to the topic of measurement: Allen & Yen (2001). Introduction to measurement theory. Waveland
Press.
2. A classic, dated, but available treatment for beginners: https://suppes-corpus.stanford.edu/techreports/IMSSS_45.pdf.
3. A recent academic article that questions the objectivity of accounting measures: http://www.cluteinstitute.com/ojs/in-
dex.php/IBER/article/viewFile/1799/1779.
6.3. Understand and enumerate the assumptions which were made by individuals when they affix a sign (or measure) to an object
to create an interpretation. Evaluate the suitability of the sign for the object, determine if other sign-object combinations are better
In topic 1 we identified questions about the measure, the sign. Here we take the next step and seek to uncover assump-
tions about how those signs are affixed to objects. For a sign (a measure) to mean something to someone, a sign must be
affixed to an object. In semiotic theory a representation is a sign-object combination for an observer (Floridi, 2005;
Zoglauer, 1996). A sign represents, or signifies, something else (Beynon-Davies, 2009; Stamper, 1985; Vigo, 2011). For exam-
ple, dark clouds (sign) portend a storm (object) to a hiker (observer). Similarly, when an end user (observer) examines an
icon (sign) of a dollar bill (object); the icon is representation about the dollar. Common accounting signs that are affixed
to objects include transactions, financial statements, and interest rates. All accounting measures are signs that signify real
objects or events to an observer.
However, in use, a sign-object combination regularly becomes a less specific, less rigorous idea. While the theory requires that
a sign, object, and observer be specified; often only a sign is specified; the object and observer are assumed. The combination
becomes the ring of the doorbell, the dark clouds, the interest rate, or the count of inventory. When individuals do this, they fre-
quently assume the object that they believe the sign represents is known by all. However, in many situations, individuals affix the
sign to different objects which leads to different interpretations (Boland, 1987; Checkland & Holwell, 1998; Dretske, 1981;
MacKay, 1969). The sign never comes with the object, it must be affixed to the object by an individual, but the individual often
takes this step for granted. The sign cannot tell an analyst the right object to affix it to—that requires judgment.
Data are signs and by themselves data do nothing. Only when individuals affix the data to an object is an interpretation
created, minds are persuaded and decisions are made. Analysts should be capable of examining how and why signs are
affixed to objects, and ask good questions about this necessary, but often overlooked choice. Signs and objects are the foun-
dation for interpretation in accounting (Bisman, 2010; Boland, 1987; O’Leary, Wilson, & Metiu, 2014; Previts & Merino, 1979;
Ritson, 2001). For a managerial accounting example, consider the common problem among students when challenged to
identify the root cause of a problem. A teacher might call these different objects symptoms, and direct the students to affix
the sign to a different object, what the teacher feels is the root cause. Without a teacher’s ‘‘right answer,” analysts often affix
signs of data to different objects without realizing that other analysts make other sign-object choices, and that their com-
bination, like the student who affixed the sign to a symptom rather than the root cause, could be improved.
6.3.1. Sign-object implications at BBE

In the BBE example, Tables 2 and 3 are comprised of signs, every number is a sign. However, the numbers by themselves
do not directly influence decisions, what the numbers signify, influences decisions. For example, the $1000 in sales of Base-
ball Equipment is attached to different objects by different participants. To an analyst who knows last year’s declining trend,
this number signifies a welcome turnaround, but upon further reflection and analysis, it can also be affixed to another
object—the weakness of baseball sales.
Similarly, the 0.7 sentiment value, created by the Big Data sentiment analysis, is just a sign. An analyst might affix this
new sign to the object ‘‘sentiment is decreasing,” or to ‘‘sentiment is returning to industry standards,” or to ‘‘sentiment is
the last thing we should consider right now.” A skeptical accountant should ask what are the cost/benefit implications of
each of these sign-object combinations. Further, it should be asked if there are other data and procedures that make one of
these three sign-object combinations, or others, more useful and reliable. The data, the signs, signify different insights; the
skeptical accountant realizes each accounting number can signify different things when it is attached to different objects.
6.3.2. Big Data implications on sign-object

Beyond BBE, these sign-object assumptions and the limitations they introduce are often ignored. While questions about
signs and objects apply to routine data, the velocity of Big Data analysis means that these measures can be calculated at any
convenient time rather than monthly or quarterly as with traditional financial signs. To consider an example, return to BBE. A
0.7 sentiment might be attached to a trend lasting a week or six months; the sign, the same sign means different things when
attached to different signs. The pace of Big Data creates many more objects for a sign such as 0.7 to be attached to. In addi-
tion, Big Data’s new pace means BBE must decide how often the sentiment analysis sign should be used and how long to wait
after production changes before a new value should be assessed. Big Data means that new questions about frequency of anal-
ysis and confidence in any sign-object combination must be examined.
Not only does the new velocity of Big Data create sign-object problems, the unstructured nature of Big Data also creates
sign-object problems. Unstructured data such as sentences, images, dates, and speech acts are again, all signs. The novelty of
these new signs, their lack of structure and consistency, and a lack of commonly accepted sign-object combinations means
that unstructured Big Data will lead to variations in sign-object combinations. With more variation, more uncertainty may
occur about sign-object choices creating the need to ask more questions about sign-object combinations.
1. Why do we think this sign is appropriate to affix to this given object? What are the disadvantages in using this specific
sign for the given object, and what are the advantages? What are the cost/benefit tradeoffs for this sign-object
combination?
2. How strongly do other individuals support using this sign for that object? What other objects are other analysts affixing
this sign to? Why has someone chosen to address this object with this sign—is it convenience and availability of the sign,
is it convention, or is it how other companies do it, or some other explanation?
3. In what ways do we attribute this sign to this object out of tradition? In what ways do we attribute this sign to this object
by common cultural bias? For what other reasons did we pick this sign?
4. What sign could be created from the data that would be better for that object? What can we do to acquire and use those
alternative signs? Are there other strategies we could employ to uncover how different individuals are assigning signs to
objects– what are those?
5. Based on the goal or objective of the analysis, are we, or I, or any decision maker focusing on the right objects? What
objects should be addressed? Compare the available signs for these objects, which are most useful? What other objects
might be better, or as good, to focus on?
6.3.4. Read more
1. An introduction to semiotics: http://plato.stanford.edu/entries/peirce-semiotics/.

2. A general overview of semiotics: https://monoskop.org/mwg-internal/de5fs23hu73ds/progress?id=0AnIwf6ApAle
SIZQ0IVXm26rPJu0sTUxBrM1qZ3o1Sc,
3. An academic example of using semiotics to understand auditing: http://www.apira2013.org/past/apira1998/archives/
pdfs/56.pdf.
6.4. Be able to evaluate the extent to which a given representation is unique to each individual. Be able to identify where these
intersubjective differences are significant or unnoticed and be able to use these differences in an informative way
In the previous topic, if individuals affix different signs to different objects different interpretations (or meanings) are cre-
ated. Even if two individuals use the same sign-object combination, the interpretation they create may still be different
(Chandler, 2007; Hong, Morris, Chiu, & Benet-Martinez, 2000; Shore, 1996). For an interpretation to be the same, and intersub-
jective agreement to occur, not only must the sign and object be the same, the interpretation of the sign and object must be very
similar for each individual. Differences in interpretation can be minor and intersubjective agreement is reasonably assumed. At
other times, these differences can be significant, surprising, useful, and informative; they are also normal and frequent. Most of
the trouble caused by these differences arise when they go unnoticed. The impact of unnoticed interpretations has been the
focus of behavioral decision theory and cognitive psychology (Kahneman & Tversky, 1979; Schwenk & Valacich, 1994;
Tversky & Kahneman, 1974), with these studies consistently showing that cultural biases and individual interpretation are
common.
Accounting tasks can be affected by significant or unnoticed differences. For one accountant, a particular transaction
(sign) is an exception (object), but needs no further examination. For another accountant, the same transaction is also an
exception, but further investigation is warranted. In a second example, the two accountants could also derive different inter-
pretations about the risk of a project even though they use the same numbers (signs) for the relevant factors (objects).
6.4.1. Interpretation implications at BBE

In the BBE example, significant and unnoticed differences can create problems. Multiple observers and stakeholders may
associate the $124 BBE loss as a sign to be attached to the object of ‘‘poor BBE managerial performance.” This would include
observers both internal and external to the firm, assuming external observers would have access to this segment reporting.
Internal observers would certainly include management responsible for differing aspects of BBE operations whose interpre-
tations regarding the object may differ widely due to biases such as ‘‘turf protection,” and ‘‘self-serving tendencies”, and con-
firmation bias (Hammond et al., 1998; Kelley, 1967). Marketing managers may interpret the sign-object to indicate the need
to increase cost efficiencies, while manufacturing managers may interpret this same sign-object as the need to improve mar-
keting strategy. Differing interpretations may also exist within external observers, such as shareholders having access to this
segment reporting. Depending upon risk preferences, some shareholders may interpret this sign-object to mean sell shares,
while others to stay the course presuming internal observers will ‘‘right the ship” regarding needed managerial performance
improvements. These differences become a more significant problem when managers and observers assume others are inter-
preting the sign-object as they do.
At BBE, the impact of Big Data on significant or unnoticed differences needs to be considered. The supplier risk analysis
score can be generated via a dashboard that allows end users to select time periods, as well as the types and sources of text to
examine. End user self-service is a goal of Big Data analysis as it allows domain expert end users to slice and dice the data,
pose questions, and observe results and re-slice and re-dice until satisfied. However, by doing this slicing and dicing, the
accountant-analyst creates a different interpretation of the final result than another analyst who only observes the final
number. For example, an accountant at BBE generates a particular risk analysis score for a troubled supplier after a series
of iterations on the data, and communicates this score to the decision makers. The accountant’s interpretation of the score
will be unique to her as only she knows what else she considered and sifted through and removed at each step along the way.
Unique and unaware interpretations have long been a problem with routine data analysis; Big Data contributes a new
wrinkle—self-service provides an analyst with much more data which yields a much more detailed back story that creates
a very unique interpretation for them.
6.4.2. Big Data implications on interpretation

Beyond BBE, significant and unnoticed differences are often ignored. While the self-service aspect of Big Data applies
beyond BBE, the volume of Big Data creates another problem. Big data, due to its volume, is too often given an unwarranted
position of objectivity. We agree the data is objective, but interpretation is not. However, with the overwhelming volume of
objective data in a Big Data analysis, analysts can be distracted from asking questions about differences in interpretation of
that data. According to Boyd and Crawford (2011), there is a tendency for Big Data analysts to see their interpretation as facts
that mean the same thing to everyone as opposed to an opinion that is unique to them. Interpretations vary while the facts,
the data, remain the same, but most analysts fail to recognize the transition. This position of objectivity often leads to unwar-
ranted, unquestioned expectations that facts and data will somehow answer important questions definitively. In such an
environment, the analyst who can ask questions and surface the unstated assumptions that are required for interpretation
is both unexpected and valuable.
1. How unique is my interpretation of the sign-object? What interpretations are others creating from this sign-object? What
are the advantages and disadvantages, and the costs and benefits of the various interpretations?
2. Assess the extent to which experience, tradition, or culture is leading different individuals to unique interpretations. Eval-
uate the extent to which interpretations are flexible and can become more uniform with communication or they are more
fixed.
3. To what extent do other individuals recognize their own unique interpretation?
4. How can I create the sign-object interpretation that others use? By making this interpretation, what other interpretations
become clear?
5. On which interpretations is a speaker unaware of a lack of intersubjective agreement, how can this lack of agreement be
best addressed?
6. To what extent, and on which sign-object combinations does the speaker or decision maker treat their own interpreta-
tions as fact, as objective? How can you move this individual away from this objective viewpoint?
6.4.4. Read more
1. An explanation of fact and opinion and the distinctions between them: http://www.philosophersmag.com/index.php/
tpm-mag-articles/11-essays/26-the-fact-opinion-distinction.
2. An academic article on the assumptions of intersubjectivity in accounting: http://www.sciencedirect.com/science/article/
pii/036136829190025A.
3. A good introduction on representations in semiotics: http://visual-memory.co.uk/daniel/Documents/S4B/sem02a.html.
6.5. Be able to identify potential differences in databases that have been combined in this analysis, the types of transformations used
to integrate them, and the assumptions and possible errors that result
One of the fundamental characteristics of Big Data is that the data often comes from a variety of sources. These data often
vary on a number of attributes such as completeness, currency, credibility, precision, auditability, objectivity, reliability, and
trustworthiness (Šķiltere & Jesiļevska, 2014; Merino, Caballero, Rivas, Serrano, & Piattini, 2015). While these attributes are
important to consider when analyzing a single database, they become even more important to recognize when databases
are combined. Databases vary on these attributes and in order to combine them, corrections and transformations of the data
are necessary. A common example is combining data from different political polls—how to combine polls of likely voters and
all voters, or polls that allow undecided with those that don’t.
In addition to variation in data quality attributes, other differences in databases may create errors. The data may have
been obtained at different times, for different objectives, or with different metadata. Further, changes in the technology used
to gather and store the data, in data types, in security used, and the data architecture can also lead to incompatibility issues.
Finally, the taxonomies or classifications used to generate the data in different databases may have different definitions.
Accountants often encounter the issue of data variation, or data incompatibility when asked to roll up cost measurements
that were generated using different rules. They also make profitability assessments by allocating costs across different prod-
ucts or divisions even though what should count as costs differ in each product or division. Further, the EY Reporting: Issue 9
(2015) describes these and other barriers to data integration as it pertains to the audit profession.
6.5.1. Transformation implications at BBE

In the BBE example, both internal and external financial benchmarking may be undertaken by stakeholder observers to
assist them in determining the appropriate object to attach the reported $124 loss to. This benchmarking may reveal this
sign should be attached to potential objects of: (1) comparatively-better financial performance, (2) worse financial perfor-
mance, or (3) equivalent financial performance. To the extent different timeframes are represented across the databases,
transformations may be necessary to convert revenues and costs from nominal dollars to real dollars due to differing values
of key economic metrics (interest rates, GNP growth rates, unemployment rates, etc.). Also, transformations may be neces-
sary to revenues to compensate for differing stages of product life cycles. Further, if interim year (quarterly) financial data are
combined, lack of auditability of measures could be a concern, requiring incorporating analytical review-type procedures to
get comfortable with the reliability of the data. And of course, transformations may also be necessary to account for differing
cost allocation procedures to segments, differing cost structures (labor intense vs. automation), differing depreciation meth-
ods and age of depreciable assets for both within-firm and across-firm benchmarking. While these transformations may be
quite time consuming and costly to accomplish, they are necessary to the extent observers ascribe significant benefits for
attaching the $124 loss sign to the most appropriate object mentioned above. Each transformation introduces assumptions
and possible errors that must be considered.
6.5.2. Big Data implications on transformation

Benchmarking has been done in the past with routine data. However, the volume and variety of Big Data provides many
new opportunities to benchmark, to ‘‘combine” financial databases. For example, BBE would like to use the sentiment anal-
ysis measure to improve financial forecasts and to provide a more complete justification for auditors. However, this senti-
ment analysis is based on a non-SQL database that stores comments and links to comments in a graph structure (for more on
Graph databases see Sullivan, 2015). But if the sentiment analysis measure forecasts a reduction in sales, how should that
forecast transform return reserve or accounts receivable? And combining that volatile data with more structured consistent
accounting data raises other issues such as how should the sentiment period be determined, how much variance should be
maintained in forecasts, as well as more specific questions such as if sentiment is negative does that imply an increase in
return reserve of 5% or 25%? The same transformation issues arise when the supplier risk analysis score from another
non-SQL datasource is used to update risk records in the accounting database.
In closing, a classic example of how inattention to the challenges of combining databases can lead to poor Big Data anal-
ysis is the case of Goggle Flu Trends (Lazer et al., 2014). Goggle Flu Trends (GFT) uses search engine inputs to forecast the flu.
GFT has persistently overestimated the extent of seasonal flu outbreaks for a number of years. One reason for the chronic
overestimation was that changes in Google’s search algorithm in 2012 went unnoticed by the flu forecasting team that used
search engine data to create the forecasts. These relatively minor changes in the technology used to gather data introduced
incompatible databases that required transformations and led to systematic errors in flu forecasts. Accountants already have
experience with data compatibility issues, they just need to recognize these compatibility issues also arise in Big Data anal-
ysis and be ready to ask questions about how the data in various databases are transformed.
1. In the databases that were combined for this analysis, compare and contrast the data quality issues of completeness, cur-
rency, credibility, precision, auditability, objectivity, reliability, and trustworthiness. How do the various data sources
vary on these dimensions, and to what extent do these differences limit the analysis?
2. Where transformations of the data were necessary? Identify the rules used to transform the data and assess the costs and
benefits of that transformation. Evaluate how the transformations impacted subsequent analysis.
3. Evaluate whether subsets of the data were obtained at different times, for different objectives, with different meta data,
with different technology, or using different classifications. Enumerate the ways in which these differences impact sub-
sequent analysis.
4. For each set of data used in the analysis, determine whether data was eliminated during the combination and assess the
impact of the elimination of this data on the results?
5. If any of the above questions are answered in the affirmative, who decided to alter or transform the data, what other
transformations were appropriate but ruled out? Attempt to determine why that data was altered.
6. Why was each of the databases collected and to what purpose is it typically used? Determine if that purpose or goal
impacts the quality of the data, or its usefulness when combined with other data.
6.5.4. Read more
1. A good explanation about the impact of combining heterogeneous databases: http://www.wired.com/insights/2014/10/

big-data-new-oil-or-snake-oil/.
2. A set of relevant quality questions from Experian: http://www.experian.com/blogs/marketing-forward/2015/04/28/data-
management-questions-ask/.
3. The importance of data quality on supply chains: Hazen, B. T., Boone, C. A., Ezell, J. D., & Jones-Farmer, L. A. (2014). Data
quality for data science, predictive analytics, and big data in supply chain management: An introduction to the problem
and suggestions for research and applications. International Journal of Production Economics, 154, 72–80.
6.6. Be aware of common statistical errors, be able to critique the misapplication of statistics to Big Data databases, and be able to
describe limitations of statistical analysis
The misuse of statistics has been well identified in the business environment by books such as ‘‘How to Lie with Statistics”
(Huff, 1993), and by commonly used expressions such as ‘‘Lies, Damn Lies, and Statistics” (Twain, 1906). Common examples
of statistical errors include correlation not causation, non-representative sampling, scaling distortions, elimination of unfa-
vorable data, mistaking correlation for explanation, confusion between samples and populations, and others.
6.6.1. Statistical misuse implications at BBE

In the BBE example, the misuse of statistics can be expected. For example, the sentiment score is a statistical value. Naïve
accountants might think it is correlated with future sales, skeptical accountants would ask what else is occurring in the envi-
ronment—has concussion awareness raised concerns about helmet safety, have competitors dropped prices, are customers
now expecting more from our products, are baseball players—typically from more affluent families—harder to satisfy? Some-
thing else might be driving both sentiment and sales—bad economy, weather, or time of year. Perhaps more negative com-
ments are due to increased sales last year and the percentage of negative comments per customer is actually lower, not
higher. In addition, rates of overhead application are often derived by statistical methods used to identify cost drivers
and to estimate the relationship between costs and corresponding drivers.
6.6.2. Big Data implications on statistical misuse

While these types of errors apply to routine data, the characteristics of Big Data make statistical misuse more important
(Bollier, 2010). First, the velocity of Big Data can at times lead to an emphasis on quickly spotting patterns even if there is no
theory or model that helps explain the statistical anomaly. In addition, the volume of Big Data can lead some proponents to
proclaim with the power of Big Data tools to evaluate all possible relations, simply look for correlations. First, the absence of
theory, or evaluating all relations, increases the possibility of false positives; that if you look for correlations among 100 mea-
sures, you will find by chance five false positives if a = 5 is used. Second, the size of Big Data can also lead to impressive cor-
relation coefficients. However, correlation is not explanation; the amount of explained variation in the dependent variable is
the more important measure. Third, Big Data visualizations are so visually impressive that improper, or misleading statistics
can be easily disguised or overlooked. Fourth, the imposing volume of data in Big Data can give analysts the mistaken
impression that these types of errors are not as significant as with smaller databases. The volume of data somehow compen-
sates for statistical limitations. Fifth, Big Data analysis too often results in truth claims when a population is analyzed. When
a population, rather than a sample is analyzed, the result is given as theoretically inerrant and therefore ‘‘true”. For example,
a census of a population of people may be considered to have true counts. However, for reasons ranging from evasion to new
births and deaths, the requirement for true measures of the population are impeccable, impossible, and potentially misused.
In a similar way, accountants using Big Data tools often analyze entire populations rather than samples, and ascribe too
much truth to the population measures. For example, in an audit all the transactions of a client for a given accounting period
can be analyzed. Having ostensibly captured the entire population of transactions, and therefore freed from the approxima-
tions of confidence intervals and level of significance probabilities, accountants may be more inclined to treat the results as
true. Treating each audit exception record as true may lead auditors to better understand the firm’s activities, but there will
always be errors that must be understood and questioned such as data collection procedure errors, reporting biases, query
construction errors, communication breakdowns, etc. Accordingly, analysts need to understand and appreciate statistical
errors and misuse and how they limit the validity of Big Data analysis.
1. Evaluate if correlation is being treated like causation. What other factors may be affecting both factors in the correlation?
Do other individuals interpreting this data assume causation?
2. If sampling was conducted, enumerate the ways that the sample is not representative of the total population. Which of
these ways is significant and what impact does that have on the results?
3. Identify each choice that was made in the scaling of the results’ presentation—were these choices made to make the
results from the analysis stronger than warranted? Specify other choices that could have been made, for example in
the scaling of the data, and evaluate if those presentations would have been more appropriate? What is the data being
compared to, what could it have been compared to and why was the selection made?
4. Evaluate the rules used to generate the sample and identify where choices were made. Create examples of data that these
rules would have eliminated and assess if this type of data should have been excluded.
5. Assess the validity of the rules used to categorize discrete data (if dates were used why these dates, if four categories of a
variable, what impact would there be with five or six categories, etc.?)
6. If an entire population was used, rather than a sample, evaluate how exceptions to the population were treated—are some
treated as noise and dismissed that should be retained and evaluated? In population analyses are the limitations of mea-
surements and variation in collection techniques adequately considered?
6.6.4. Read more
1. 1. The updated classic volume on how statistics can be misused: Huff, D. (2010). How to lie with statistics. WW Norton &
Company.
2. A good overview of the challenges of Big Data on several key statistical issues: Bollier, D., & Firestone, C. M. (2010). The
promise and peril of big data (p. 1). Washington, DC: Aspen Institute, Communications and Society Program.
3. A well written account of the perils of letting the data speak without an a priori theory: Harford, T. (2014). Big data: A big
mistake? Significance, 11(5), 14–19.
6.7. Be able to apply the lessons of underdeterminism and its implications for analytics
The final two topics shift the focus from data to results; more specifically, they apply to the explanation of results. For the
purposes of our discussion, an analysis is the examination of data using a procedure or statistical technique that generates
one or more results. The explanation then occurs via interpretation of results, which are primarily quantitative in nature.
Relevant to this process of results explanation is the area of underdetermination of scientific theory, also called underdeter-
minism. This is a concept in philosophy of science that states the evidence available at a given time may be insufficient to
determine what beliefs should be held in response to it (Babich, 1993). In other words, for any set of data, a theory that
explains patterns in the data underdetermines the data, there will always be other, at least equally plausible, explanations
for the observed patterns. Underdetermination was first articulated by John Stuart Mill, ‘‘an hypothesis is not to be received
as probably true because it accounts for all the known phenomena, since this is a condition sometimes fulfilled tolerably well
by two conflicting hypotheses. . .while there are probably a thousand more which are equally possible, but which our minds
are unfitted to conceive” (Ducheyne, 2008; Mill, 1867). Quine applied this insight to all knowledge claims (Quine, 1990).
This epistemological challenge in science has profound implications for confidence that any theory will provide the truth
about a set of data. But as Quine pointed out (1990), this challenge is not limited to scientific theories, but also extends to any
results about any set of data. One way epistemologists explain this is with the metaphor of map making. Many ‘‘true” maps
can be created for a territory because many display distinct or different attributes about the territory such as resources, roads
or populations. Disconcertingly, underdeterminism goes one step further—the maps can contradict each other and still be
‘‘true.”
Underdetermination occurs in accounting, for example, audits apply rule sets to a set of transaction data to spot anoma-
lous patterns. Different rule sets applied to the same data will uncover different anomalies. Underdetermination tells us that
there will always be other audit rule sets that can be applied to the same set of transactions that will also produce at least as
many possible anomalies.
6.7.1. Underdetermination implications at BBE

Let us assume the management of BBE incorporated the structured approach to asking good questions throughout the Big
Data analysis related to the BBE’s sign of $124 loss. As a result, management collectively adopted the following sign-object-
interpretation relationship: assigning the $124 loss to the object of poor managerial performance, with the specific interpre-
tation of ineffective marketing and low pricing strategies. Now what? Does management consider this sign-object-
interpretation relationship ‘‘truth” and move forward to take ‘‘corrective action” within Marketing? Before allowing this
to truncate further discussion, and investing resources moving forward to ‘‘fix” Marketing, the relationship that emerged
from the Big Data analysis needs to be carefully reconsidered in light of potential competing relationships suggested by the
other data analysis findings. For example, a deeper analysis of the ‘‘low” customer sentiment score might reveal a pattern of
customer complaints regarding the quality of some of the leather used in our baseball gloves, which is the dominant product
in this line. This in turn could explain the lowering of prices in response to the reduced demand as a result of this quality
problem. Or, an analysis may indicate a pattern of new competition using cheaper offshore labor which is taking some of
our market share, prompting price reductions. Accountants should resist the temptation to over-ascribe confidence in any
single explanation emerging from a Big Data analysis, as there are likely limitless other explanations. A cost/benefit analysis
must be evoked to assist in determining when to stop searching for alternative explanations to the one settled upon from the
Big Data analysis. Information economics is at play here, as both the marginal cost, and marginal benefit, of obtaining further
information regarding the sign-object-interpretation relationship must be considered.
6.7.2. Big Data implications on undetermination

Underdeterminism has always applied to explanations of the results of routine data. However, the volume of Big Data
lead analysts to make unwarranted but confident explanations of results. This overconfidence in Big Data analysis is evident
in dramatic but naive statements that indicate confusion about the truth of data and truth of the explanations of the data—
‘‘that our business decisions are data driven” or that ‘‘With enough data, the numbers speak for themselves” (Anderson,
2008; Boyd & Crawford, 2011; McAfee et al., 2012). While the quantity or the truth of the data have no impact on underde-
terminism, Big Data proponents act as if having more data generates true explanations. Underdeterminism reminds analysts
that the data can ‘‘prove” many different things, that the numbers, the results, always say many things.
1. After generating a result from analysis of the data, enumerate other results for other analysis of the same data that are as
plausible as the one presented. Further, generate contradictory results that may also be true.
2. Evaluate the advantages and disadvantages of continuing to look for other results. Determine an appropriate stopping
rule for discontinuing this effort to find other results from other analysis.
3. For explanations of results given to me by others, evaluate the strength and conviction they have in the validity of their
results. If warranted, determine other explanations of the data. Evaluate if others are overconfident about the current
results and point out other results.
4. In what ways has our overconfidence in our results truncated our discussion of the limitations of this analysis; determine
the factors that have led to the premature acceptance of the current results.
5. Identify other missing data that if available might show the current results to be less reasonable. Identify other factors, or
other data that if you had collected it, might also account for the evidence. Specify unquantifiable factors that were
ignored that would change the results.
6. Craft an appropriate result statements while avoiding stating these results too conclusively. Create a balanced statement
of the results that appropriately qualifies the result without gutting it.
6.7.4. Read more
1. An introduction to the concept of underdetermination of scientific theory: http://plato.stanford.edu/entries/scientific-

underdetermination/.
2. A shorter introduction: http://www.encyclopedia.com/article-1G2-3446802059/underdetermination-thesis-duhem-
quine.html.
3. A video introduction to scientific underdetermination is available via YouTube: https://www.youtube.com/watch?
v=co8adINPCns.
6.8. Be able to explain induction and the limits it creates for analytics
With induction, or inductive reasoning, premises lead to conclusions, and conclusions are never certain, only probable,
even if all the premises are true. Induction reasons from the particular to the general. In contrast, deductive reasoning, is
the process of reasoning from many statements to reach a definitive conclusion. With deductive reasoning, if the statements
are true, the conclusion must also be true. It argues from general to particular. An inductive example is the statement that all
transactions we have audited are valid, therefore all the firm’s transactions are valid. A deductive example is all transactions
during this hour were recorded on device x, and device x is certified; therefore, all transactions during this hour are certified.
All accounting documents and data are premises which lead to inductive explanations. No number of fraudulent trans-
actions proves fraud; no history of reasonable journal entries verifies truth and removes all doubt. All conclusions, verifica-
tions and attestation are tenuous. One implication for accounting is that because explanations cannot be true or proven, but
only reasonable, and as a result, determining how much data or evidence is required to establish reasonableness becomes
the fundamental judgment issue. Accounting students need to understand how these judgments are made, how they can
be improved, and how to collect the best evidence for this standard. By deduction we know that if a given Big Data analysis
is inductive, and all inductive explanations (or conclusions) can be wrong, the explanations of the Big Data analysis and
results can be wrong. This logic should lead accounting students to conclude that every inductive explanation can always be
wrong.
6.8.1. Induction implications at BBE

In the BBE example, a skeptical accountant realizes that with more data all current explanations may be invalidated. If
one explanation of the crisis is that baseball sales have fallen, this can change next month; if baseball costs have risen, this
can also unexpectedly change; if concussions are driving sentiment down, this can change. The team doesn’t know anything
to be true, and if it waits until next month, it won’t know anything for sure then either. The sophisticated accountant knows
the limits of reasoning, that truth will never be known, uncertainty only shifts, it is never eliminated. In such a setting, they
can exercise judgment about how much more data is needed to draw a reasonable explanation about what is occurring.
6.8.2. Big Data implications on induction

The limits of induction apply to routine data; however, Big Data proponents overlook them; perhaps again due to over-
confidence in the volume of data. For example, in a Big Data analysis of health care research, Krumholz (2014) glosses over
the limitations of induction when he states that the most important attributes of explanations are consistency and validity.
An odd attribute to strive for as no inductive explanation is ever ‘‘valid”, they are always contingent on the data analyzed to
date. Explanations should not be judged as valid or invalid, but more reasonable or less reasonable. While this can appear to
be a matter of word choice, the use of the term validity reveals misguided confidence—explanations from Big Data analysis
can always be wrong. While this overconfidence is inappropriate, it is the lesser of two problems of induction. A more sig-
nificant problem occurs when an analyst believes his/her inductive explanation is actually true; he/she quit seeking data, and
only new data can show an inductive explanation is false. In the absence of new data, even incorrect inductive explanations
stay true.
The limitations of induction apply to routine data analysis as well as Big Data analysis. The concern with Big Data is that
these fundamental limitations are overlooked. Some analysts may believe a large sample overcomes these limitations.
Others may believe that if an entire population of data is examined, the limitations are overcome. For example, if all the
transaction records of a company are examined for fraud and none is found, the conclusion is still inductive. Today, an ana-
lyst may discover a new method of fraud that if applied to the entire population results in a new explanation—there is wide
spread fraud. The nemesis to management is uncertainty, and Big Data gives a false sense of security from that uncertainty—
a bigger data tree to hide behind. But at its core, Big Data analysis, like all analysis, is inductive, and as a result, limited.
1. Identify and enumerate where the analyst is qualifying the strength of the explanations appropriately. Specify where the
careful identification of the limits of the analysis and the limits of the explanations can be found.
2. Specify examples of data that would disprove or contradict the explanation, at least five. Analyze the likelihood for each of
these five data points occurring.
3. Articulate the rule being used to stop collecting data, and ask, why was this rule used? Evaluate the advantages and dis-
advantages of obtaining more data.
4. Given that an explanation cannot be proven, how much data will be needed to achieve a reasonable amount of confidence
in an explanation?
5. An inductive argument often generalizes from the particular to the general; a pattern found in domain x applies to the
larger domain y. Specify the differences between the particular domain x where the data was generated and the larger
domain y to which the explanations are applied. Evaluate and identify which of these differences is significant.
6. Given the limitations of induction, what language should be used to best express the limitations of the explanations?
6.8.4. Read more
1. A good introduction to issues with inductive reasoning: http://plato.stanford.edu/entries/induction-problem/.

2. Karl Popper’s seminal work on scientific theory includes an informative section on induction as explained in a short sum-
mary by Chalmers University of Technology: http://www.math.chalmers.se/~ulfp/Review/objective.pdf.
3. A more detailed account is available from Princeton: https://www.princeton.edu/~grosen/puc/phi203/induction.html.
7. Implementation guidance
We have taught these topics to undergraduate and graduate business analytics and accounting students over the past four
years. We suggest these exercises be used throughout the second half of the course rather than early in the semester. Then,
these lessons can be applied to the analysis and projects the students completed in the first half of the course. The overall
goal of helping students build an awareness of the many assumptions that underlie Big Data analysis is achieved via repe-
tition—each week a different topic of assumptions is discussed. We have also found that these topics work well when they
are assigned to teams of students. The students research a topic, find appropriate examples from earlier class exercises or
from analysis outside of class, and present their work to their classmates. We asked the teams to generate a short list of
two or three questioning principles for each topic that then were evaluated on the final exam. On the final exam, we provided
an example analysis and set of visualizations and asked the students to apply the seven topics to identify the most significant
limitations to the analysis.
7.1. Specific use of BBE example
The BBE example can be used to accomplish many of the previously specified learning outcomes. The suggested use of
this example involves the following sequencing of steps: (1) Provide students only the information originally presented
in Table 2 (this excludes Table 3, the discussion of acquiring Big Data, and the additional information in Appendix A). Then,
facilitate a discussion regarding the reported loss of $124 and the assumptions required to conclude this entire loss could be
avoided if the BBE line was eliminated. Of course, the assumptions would be that all BBE costs would be avoided if elimi-
nated, no impact on revenues/costs of other lines, no economic opportunities of alternative uses of freed resources, etc.;
(2) Discuss what other data sources would be useful in assessing the viability of these assumptions, which leads to the infor-
mation provided in Table 3, and the additional information provided in Appendix A, being presented to students; (3) Require
students to modify the initial ‘‘sign” of the $124 loss to a more accurate assessment of the annual profitability impact of elim-
inating the BBE line via Table 4.
Steps (1)–(3) above will simply ground students with a familiarity of the ‘‘traditional” approach to the analysis conducted
in this decision context. The following steps will expand the discussion by highlighting the potential use of incorporating
‘‘non-traditional” Big Data into the analysis. (4) Ask students if the modified analysis in step (3) is sufficient, or are other data
available to further refine the analysis. To facilitate the discussion, students can be made aware that internal and external
benchmarking suggests that sales are underperforming and costs are out of line. (5) Ask students if they should question
the benchmarks used—are they realistic, how were they developed, what assumptions were used, etc.? (6) Also, inform stu-
dents of the following Big Data obtained: marketing operations has a sentiment analysis score from social media of 0.7, a
new low; data about key material suppliers that is unstructured text—including published financial analyst recommenda-
tions, litigation or various forms of insolvency protection and media comments—in order to develop a supplier risk analysis
score; similar data for customers is also obtained in order to develop a customer risk analysis score. (7) Ask students if they
feel this additional data is germane, and if so, what does it tell us and how can it be used? For example, what data is available
to further explain the low sentiment analysis score—poor quality, delayed shipping, poor customer service, stale product
designs, etc.? What specific problems generate the supplier and customer risk scores if high risk is indicated—operational
problems, cash flow concerns, lawsuits, product quality, etc. (8) Further, ask students how the Big Data should be incorpo-
rated into the analysis regarding the BBE line. Should it impact assumptions for future operating and financial budgets, indi-
cate more research and development is needed for product design, indicate changes are needed to the supply chain structure
for materials, invest more in selling and administrative functions, etc.? (9) Should other Big Data sources be considered, such
as regional macroeconomic, demographic, weather pattern, rates of youth participation in school or community baseball
activities, etc.? (10) And finally, how do we determine at which step above to stop and make a decision given needed con-
siderations for the costs/benefits of obtaining more data?
A nice way to wrap up this classroom discussion is to move into the financial accounting and audit implications of this
example. Augmenting the traditional data with Big Data could assist in the valuation of allowance for doubtful receivables,
inventory, and reserves for customer returns which would obviously impact the income statement and balance sheet. Fur-
ther, auditors may augment or extend traditional audit evidence with Big Data to assess the reasonableness of the estimates
used for valuing the assets and reserves mentioned above, as well as to assist with assessing client risk. Once these issues
have been discussed about BBE, instructors can apply the seven topics to this BBE case and ask students to generate a list
of their own questions within each topic that would apply to any Big Data case with this context.
8. Limitations
While our goal is to help students understand assumptions underlying Big Data analysis, we are not questioning the need
to conduct effective analysis. We simply are echoing calls from the workplace that our students not only be able to conduct
analysis, but act as informed skeptics and understand the limits of the analysis. And as the era of Big Data matures, more
topics may be identified and examined and added to our structured list. As experience with Big Data grows, other key ques-
tioning skills are sure to emerge. They may involve privacy, how to manage iterative analysis, how to state a clear problem or
question and gain buy-in from stakeholders, how to articulate or explain the assumptions or uncertainty of the data to the
data consumers. Finally, we recognize one key limitation to our topics: analysts often do not have complete access to how
measurements were collected for the data they are analyzing.
While Big Data analysis may appear to remove ambiguity, we believe it exacerbates it. Some questions are answered but
just as many more are created. Understanding the ambiguity of business and accounting data is unlike engineering and
math. No matter the size of the database, there will be uncertainty and with the uncertainty the need for judgment, choice,
trust, and caution.
9. Conclusion
In the current age of Big Data, analysts need not only the skills to analyze data, but higher order skills such as the ability to
ask good questions and understand the limits of the analysis. We identified and classified a preliminary set of seven topics of
questions into a framework suitable for educational purposes. These questions are technology independent and emerge from
a deeper awareness of the assumptions that support Big Data analysis. We hope to initiate the conversation about these
questions by identifying and classifying seven questioning topics. We expect this list to grow and become more refined in
coming years, and that would be our suggestion for future research. Our goal is to help future accountants become informed
skeptics and recognize the opportunity and value of asking ‘‘good” questions in this Big Data era.
Appendix A
Baseball Equipment Profitability Sign Reconciliation

As a result of analysis of data both endogenous, and exogenous to the firm, the following was revealed ($ in 000’s):
The supervision costs represent salary and benefit costs of the supervisors in charge of each product line.
Depreciation cost for machinery and equipment is charged to the product line on which the machinery is used.
The plant is leased. The lease rentals are charged to the product lines on the basis of square feet occupied.
Other fixed overhead costs are the cost of plant administration and are allocated arbitrarily by management decision.
These costs are unavoidable, regardless if the Baseball Equipment line is eliminated.
If the Baseball Equipment line is discontinued, the company will lose approximately 10% of its sales in each of the other
lines.
The equipment now used in the manufacture of Baseball Equipment is quite specialized. It has a current salvage value of
$105 and a remaining useful life of five years. This equipment cannot be used elsewhere in the company.
The plant space now occupied by the Baseball Equipment line could be closed off from the rest of the plant and rented for
$175 per year.
If the line is discontinued, the supervisor of the Baseball Equipment line will be released. In keeping with company policy
he would receive a one-time severance pay of $5.
Fixed selling and corporate administrative expenses are unavoidable.
Based upon the above additional data, Table 4 presents a reconciliation of the sign’s initial interpretation to its revised
interpretation.
Table 4
BBE sign reconciliation.
Implied annual profitability improvement of dropping the BBE line (loss avoidance) $ 124
Lost contribution margin from other lines (10%) (111)
Unavoidable costs arbitrarily allocated to BBE (204)
Sunk costs (depreciation) for BBE equipment (115)
Opportunity to sublease plant space occupied by BBE 175
Revised annual profitability impact of dropping the BBE line $(131)a
a
Ignores one time gain/loss on sale of equipment and severance payment.
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Journal of Accounting Education 38 (2017) 63–80

Contents lists available at ScienceDirect

Journal of Accounting Education

Teaching and educational notes

The need for ‘skeptical’ accountants in the era of Big Data

2. Big Data, business and accounting

3. The importance of asking good questions in the era of Big Data

5. Criteria for our topics

6.1. Illustrative example

Data and interpretation

Football equipment Baseball equipment Misc. sports items Total

6.2.1. Measurement implications at BBE

6.2.2. Big Data implications on measurement

6.2.3. Questions to ask

6.2.4. Read more

6.3.1. Sign-object implications at BBE

6.3.2. Big Data implications on sign-object

6.3.3. Questions to ask

6.3.4. Read more

1. An introduction to semiotics: http://plato.stanford.edu/entries/peirce-semiotics/.

6.4.1. Interpretation implications at BBE

6.4.2. Big Data implications on interpretation

6.4.3. Questions to ask

6.4.4. Read more

6.5.1. Transformation implications at BBE

6.5.2. Big Data implications on transformation

6.5.3. Questions to ask

6.5.4. Read more

1. A good explanation about the impact of combining heterogeneous databases: http://www.wired.com/insights/2014/10/

6.6.1. Statistical misuse implications at BBE

6.6.2. Big Data implications on statistical misuse

6.6.3. Questions to ask

6.6.4. Read more

6.7.1. Underdetermination implications at BBE

6.7.2. Big Data implications on undetermination

6.7.3. Questions to ask

6.7.4. Read more

1. An introduction to the concept of underdetermination of scientific theory: http://plato.stanford.edu/entries/scientific-

6.8.1. Induction implications at BBE

6.8.2. Big Data implications on induction

6.8.3. Questions to ask

6.8.4. Read more

1. A good introduction to issues with inductive reasoning: http://plato.stanford.edu/entries/induction-problem/.

7.1. Specific use of BBE example

Baseball Equipment Profitability Sign Reconciliation

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