Practical Statistical Sampling for Auditors.

Carroll, P; Wilburn, Arthur J.

doi:10.2307/2981519

Cited by 5 publications

(2 citation statements)

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“…The research literatures in accounting and auditing have not systematically investigated efficiency implications of using alternative numbers of sampling strata and professional standards are silent on the issue. Nonauthoritative sources provide varied recommendations regarding number of sampling strata: Roberts (1978) suggests up to five strata; Arkin (1984) suggests two or three strata; Wilburn (1984) suggests two to six strata; Guy et al (2002) suggest three to five strata; and the AICPA's (2020b) Audit Sampling guide cites a rule-of-thumb of three to 10 strata.…”

Section: Number Of Sampling Stratamentioning

confidence: 99%

“…The minimum stratum sample size needed to yield an estimate of the stratum variance is two elements (Bailey, 1981;CaseWare International, 2013a), but specification of a larger value is common in accounting and auditing applications (AICPA, 2020a;CaseWare International, 2013a;Dunmore, 1986;Texas Comptroller of Public Accounts, 2015;Wilburn, 1984). Reasons for this practice include a desire to ensure: (a) reliable estimates of strata variances and (b) appropriateness of the normal distribution for describing the estimator sampling distribution.…”

Section: Minimum Stratum Sample Sizementioning

confidence: 99%

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Designing Efficient Stratified Mean-Per-Unit Sampling Applications in Accounting and Auditing

Hall

Hoogduin²,

Pierce

et al. 2021

Journal of Accounting, Auditing & Finance

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Despite technological advances in accounting systems and audit techniques, sampling remains a commonly used audit tool. For critical estimation applications involving low error rate populations, stratified mean-per-unit sampling (SMPU) has the unique advantage of producing trustworthy confidence intervals. However, SMPU is less efficient than other classical sampling techniques because it requires a larger sample size to achieve comparable precision. To address this weakness, we investigated how SMPU efficiency can be improved via three key design choices: (a) stratum boundary selection method, (b) number of sampling strata, and (c) minimum stratum sample size. Our tests disclosed that SMPU efficiency varies significantly with stratum boundary selection method. An iterative search-based method yielded the best efficiency, followed by the Dalenius–Hodges and Equal-Value-Per-Stratum methods. We also found that variations in Dalenius–Hodges implementation procedures yielded meaningful differences in efficiency. Regardless of boundary selection method, increasing the number of sampling strata beyond levels recommended in the professional literature yielded significant improvements in SMPU efficiency. Although a minor factor, smaller values of minimum stratum sample size were found to yield better SMPU efficiency. Based on these findings, suggestions for improving SMPU efficiency are provided. We also present the first known equations for planning the number of sampling strata given various application-specific parameters.

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Section: Number Of Sampling Stratamentioning

confidence: 99%

Section: Minimum Stratum Sample Sizementioning

confidence: 99%