Faculty Advisor

Balgobin Nandram

Faculty Advisor

Huong Higgins

Abstract

In the practice of auditing, a sample of accounts is chosen to verify if the accounts are materially misstated, as opposed to auditing all accounts; it would be too expensive to audit all acounts. This paper seeks to find a method for choosing a sample size of accounts that will give a more accurate estimate than the current methods for sample size determination that are currently being used. A review of methods to determine sample size will be investigated under both the frequentist and Bayesian settings, and then our method using the Zero-Inflated Poisson (ZIP) model will be introduced which explicitly considers zero versus non-zero errors. This model is favorable due to the excess zeros that are present in auditing data which the standard Poisson model does not account for, and this could easily be extended to data similar to accounting populations.

Publisher

Worcester Polytechnic Institute

Degree Name

MS

Department

Mathematical Sciences

Project Type

Thesis

Date Accepted

2010-04-28

Accessibility

Unrestricted

Subjects

Zero-Inflated Poisson, sample size

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