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Audit sampling with nonsampling errors of the first type

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  • DOUGLAS G. BONETT
  • RONALD C. CLUTE

Abstract

. Standard statistical auditing procedures rest upon the assumption that statistical nonsampling errors do not exist. Three distinct types of statistical nonsampling errors have been identified in the literature. This paper presents new theoretical results regarding the problem of audit sampling in the presence of nonsampling errors of the first type. When nonsampling errors of the first type exist, standard statistical auditing procedures yield a negatively biased estimate of the true number of errors and dollar amounts associated with those errors. A double†audit sampling plan is introduced here and provides an unbiased estimate of the true number of errors and dollar amounts of those errors in the presence of nonsampling errors of the first type. A new concept of auditor reliability also is defined, and results analogous to those in classical measurement theory are developed for the case of nonsampling errors of the first type. The multiple auditor results reported in a previous study are reanalyzed to give an estimate of the true number of problems and an estimate of auditor reliability in a complex auditing task. Résumé. Les procédés de vérification statistiques standard reposent sur l'hypothèse selon laquelle les erreurs non dues au sondage statistique n'existent pas. Trois catégories distinctes d'erreurs statistiques autres que celles d'échantillonnage sont identifiées dans la documentation existante. Les auteurs proposent de nouveaux résultats théoriques concernant le problème de vérification par sondages en présence d'erreurs non dues au sondage appartenant à la première de ces trois catégories. Lorsqu'il existe des erreurs non dues au sondage appartenant à cette première catégorie, les procédés de vérification statistiques standard livrent une estimation négativement biaisée du nombre véritable d'erreurs et des valeurs monétaires associées à ces erreurs. Le double plan de vérification par sondages proposé ici offre une estimation non biaisée du nombre d'erreurs véritable et des valeurs monétaires correspondant à ces erreurs en présence d'erreurs non dues au sondage appartenant encore une fois à la première catégorie. Les auteurs définissent également une nouvelle notion de fiabilité du vérificateur et mettent au point des résultats analogues à ceux que permet d'obtenir la théorie classique de mesure, pour les cas d'erreurs non dues au sondage appartenant à ladite première catégorie. Ils procédent à une nouvelle analyse des résultats multiples dont il est fait état dans une étude effectuée par d'autres auteurs, cela afin d'obtenir une estimation du nombre de problèmes véritable et une évaluation de la fiabilité du vérificateur dans une tâche de vérification complexe.

Suggested Citation

  • Douglas G. Bonett & Ronald C. Clute, 1990. "Audit sampling with nonsampling errors of the first type," Contemporary Accounting Research, John Wiley & Sons, vol. 6(2), pages 432-445, March.
  • Handle: RePEc:wly:coacre:v:6:y:1990:i:2:p:432-445
    DOI: 10.1111/j.1911-3846.1990.tb00768.x
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    References listed on IDEAS

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    1. Smieliauskas, W, 1985. "Sensitivity Analysis Of The Realized Risks Of Auditing With Uncertainty Concerning Internal Control Evaluations," Journal of Accounting Research, Wiley Blackwell, vol. 23(2), pages 718-739.
    2. Duke, Gl & Neter, J & Leitch, Ra, 1982. "Power Characteristics Of Test Statistics In The Auditing Environment - An Empirical-Study," Journal of Accounting Research, Wiley Blackwell, vol. 20(1), pages 42-67.
    3. Donald P. Ballou & Harold L. Pazer, 1982. "The Impact of Inspector Fallibility on the Inspection Policy in Serial Production Systems," Management Science, INFORMS, vol. 28(4), pages 387-399, April.
    4. Samuel Kotz & Norman L. Johnson, 1984. "Effects of False and Incomplete Identification of Defective Items on the Reliability of Acceptance Sampling," Operations Research, INFORMS, vol. 32(3), pages 575-583, June.
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    Cited by:

    1. David R. Finley, 1994. "Game Theoretic Analysis of Discovery Sampling for Internal Fraud Control Auditing," Contemporary Accounting Research, John Wiley & Sons, vol. 11(1), pages 91-114, June.

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