Bounds for monetary-unit sampling in auditing: an adjusted empirical likelihood approach
Bounds for monetary-unit sampling in auditing: an adjusted empirical likelihood approach
It is common practice for auditors to verify only a sample of recorded values to estimate the total error amount. Monetary-unit sampling is often used to over-sample large valued items which may be overstated. The aim is to compute an upper confidence bound for the total errors amount. Naïve bounds based on the central limit theorem are not suitable, because the distribution of errors are often very skewed. Auditors frequently use the Stringer bound which known to be too conservative. We propose to use weighted empirical likelihood bounds for Monetary-unit sampling. The approach proposed is different from mainstream empirical likelihood. A Monte–Carlo simulation study highlights the advantage of the proposed approach over the Stringer bound.
Stringer bound, coverages, external audit, nominal level, tolerable error amount, unequal probability sampling
2739-2761
Berger, Yves
8fd6af5c-31e6-4130-8b53-90910bf2f43b
Chiodini, Paola
e48e8bdb-1195-43da-8d3c-c01a39c8ef89
Zenga, Mariangela
e608f056-908f-4756-8212-658ea0492f4a
December 2021
Berger, Yves
8fd6af5c-31e6-4130-8b53-90910bf2f43b
Chiodini, Paola
e48e8bdb-1195-43da-8d3c-c01a39c8ef89
Zenga, Mariangela
e608f056-908f-4756-8212-658ea0492f4a
Berger, Yves, Chiodini, Paola and Zenga, Mariangela
(2021)
Bounds for monetary-unit sampling in auditing: an adjusted empirical likelihood approach.
Statistical Papers, 62 (6), .
(doi:10.1007/s00362-020-01209-w).
Abstract
It is common practice for auditors to verify only a sample of recorded values to estimate the total error amount. Monetary-unit sampling is often used to over-sample large valued items which may be overstated. The aim is to compute an upper confidence bound for the total errors amount. Naïve bounds based on the central limit theorem are not suitable, because the distribution of errors are often very skewed. Auditors frequently use the Stringer bound which known to be too conservative. We propose to use weighted empirical likelihood bounds for Monetary-unit sampling. The approach proposed is different from mainstream empirical likelihood. A Monte–Carlo simulation study highlights the advantage of the proposed approach over the Stringer bound.
Text
EL_Auditing
- Accepted Manuscript
More information
Accepted/In Press date: 8 October 2020
Published date: December 2021
Additional Information:
Funding Information:
We wish to thank the European Union’s Sevenths Programme for Research, Technological Development and Demonstration (Grant Agreement No 312691 - InGRID), for supporting the visits of Paola M. Chiodini and Mariangela Zenga to the University of Southampton.
Publisher Copyright:
© 2020, The Author(s).
Keywords:
Stringer bound, coverages, external audit, nominal level, tolerable error amount, unequal probability sampling
Identifiers
Local EPrints ID: 444575
URI: http://eprints.soton.ac.uk/id/eprint/444575
ISSN: 0932-5026
PURE UUID: 5aeee958-e0f7-41a8-8637-fe6efe15da02
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Date deposited: 26 Oct 2020 17:31
Last modified: 17 Mar 2024 05:59
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Contributors
Author:
Paola Chiodini
Author:
Mariangela Zenga
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