CFE-INVESTIGATION practice question 12 of 25

Which of the following BEST describes the data analytics approach known as predictive analytics?

Answer options

A: The employment of a learning algorithm that identifies similarities, patterns, or anomalies within a data set on its own, without human involvement

B: The configuration of a business program to emulate and integrate the actions of a human to execute certain business processes thus increasing efficiency and automating repetitive manual tasks

C: The use of historical data, along with analyses, statistics, and machine learning components, to build a mathematical model that captures important trends and creates a quantitative forecast Correct answer

D: The use of layered artificial neural networks to accommodate more data and more sophisticated algorithms to identify complex patterns

Correct Answer:

C. The use of historical data, along with analyses, statistics, and machine learning components, to build a mathematical model that captures important trends and creates a quantitative forecast

Explanation

Predictive analytics is a data analytics approach focused on making predictions about future outcomes. It utilizes historical data in conjunction with statistical algorithms and machine learning techniques to identify the likelihood of future results. A mathematical model is constructed based on past trends and patterns, which is then used to generate a quantitative forecast. This approach helps organizations anticipate future events, such as the probability of fraud occurring in a given transaction.

Why Incorrect

A. This describes unsupervised machine learning, a technique that can be used within predictive analytics but is not the complete definition of the approach itself.
B. This describes robotic process automation (RPA), which is a business process automation technology, not a data analytics approach for forecasting.
D. This describes deep learning, a specific and advanced subset of machine learning. While used for predictive tasks, it is too narrow to be the best overall description.

References

Association of Certified Fraud Examiners. (2023). Fraud Examiners Manual, International Edition. Section 2: Technology. The subsection on "Understanding Data Analytics" defines descriptive, predictive, and prescriptive analytics (e.g., 2.404-2.406).

Siegel, E. (2016). Predictive Analytics: The Power to Predict Who Will Click, Buy, Lie, or Die (Revised and Updated ed.). Wiley. Chapter 1 provides a foundational definition of predictive analytics as a technology that learns from experience (data) to predict future behavior.

Keep practicing

Take the free CFE-INVESTIGATION practice test

Ten exam-style questions with answers and explanations, plus the exam facts and study guides.

Start the free practice test