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Using past experience to optimize audit sampling design

Author

Listed:
  • Alfio Marazzi

    (Lausanne University Hospital
    Nice Computing SA)

  • Yves Tillé

    (University of Neuchâtel)

Abstract

Optimal sampling designs for audit, minimizing the mean squared error of the estimated amount of the misstatement, are proposed. They are derived from a general statistical model that describes the error process with the help of available auxiliary information. We show that, if the model is adequate, these optimal designs based on balanced sampling with unequal probabilities are more efficient than monetary unit sampling. We discuss how to implement the optimal designs in practice. Monte Carlo simulations based on audit data from the Swiss hospital billing system confirms the benefits of the proposed method.

Suggested Citation

  • Alfio Marazzi & Yves Tillé, 2017. "Using past experience to optimize audit sampling design," Review of Quantitative Finance and Accounting, Springer, vol. 49(2), pages 435-462, August.
    • Handle: RePEc:kap:rqfnac:v:49:y:2017:i:2:d:10.1007_s11156-016-0596-7
    DOI: 10.1007/s11156-016-0596-7
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    References listed on IDEAS

    as
    1. Desislava Nedyalkova & Yves Tillé, 2008. "Optimal sampling and estimation strategies under the linear model," Biometrika, Biometrika Trust, vol. 95(3), pages 521-537.
    2. Jean-Claude Deville & Yves Tille, 2004. "Efficient balanced sampling: The cube method," Biometrika, Biometrika Trust, vol. 91(4), pages 893-912, December.
    3. Wally Smieliauskas, 1986. "Control of sampling risks in auditing," Contemporary Accounting Research, John Wiley & Sons, vol. 3(1), pages 102-124, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Roberto Benedetti & Maria Michela Dickson & Giuseppe Espa & Francesco Pantalone & Federica Piersimoni, 2022. "A simulated annealing-based algorithm for selecting balanced samples," Computational Statistics, Springer, vol. 37(1), pages 491-505, March.
    2. Bartłomiej Janusz, 2019. "Application Of The Strategy Combining Monetary Unit Sampling And The Horvitz– Thompson Estimator Of Error Amount In Auditing – Results Of A Simulation Study," Statistics in Transition New Series, Polish Statistical Association, vol. 20(2), pages 85-106, June.
    3. Janusz Bartłomiej, 2019. "Application Of The Strategy Combining Monetary Unit Sampling And The Horvitz– Thompson Estimator Of Error Amount In Auditing – Results Of A Simulation Study," Statistics in Transition New Series, Statistics Poland, vol. 20(2), pages 85-106, June.

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    More about this item

    Keywords

    Audit; Hospital bill audit; Monetary unit sampling; Dollar unit sampling; Balanced sampling; Horvitz–Thompson Estimator;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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