On a Mixed-Sequential Estimating Procedure With Application to Audit Test in Accounting.

Abstract The article focuses on a mixed-sequential estimating procedure with application to audit tests in accounting. One of the purposes in external auditing is to develop a valid opinion on the state of control of a business system. To arrive at such an opinion involves detailed system tests, for example, testing invoices against purchase orders with respect to prices and quantities. Because of time and expense, it is desirable to minimize the extent of these tests, consistent with the quality and standards of assurance desired. In this commonplace audit situation, the use of various statistical sampling techniques has been long advocated. In practice, however, few accountants have found existing sampling techniques to be entirely satisfactory in evaluating the state of system control. The purpose of a pure acceptance sampling technique is essentially to make a decision. As applied to a particular control area, acceptance sampling will yield a "yes" or "no" decision as to whether or not the control area meets a pre-specified level of acceptability. In any particular control area, the auditor, however, is rarely interested in making a yes or no decision on acceptability.