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Misanalysis of Choice-Based, Matched, and Stratified Samples In Auditing Research
Donald P. Cram,
Unaffiliated
Iris Stuart, California State University Fullerton
Vijay Karan, California State University Fullerton
ABSTRACT. Three methodological errors in the analysis of choice based and matched samples in accounting research have been identified by Cram, Karan, Stuart (CKS, 2007). CKS demonstrate that when non-random samples are collected, they must be analyzed taking their non-randomness properly into account. Otherwise, coefficient estimates are inconsistent and may be attenuated, exaggerated, or even reversed from their true values. We discuss the misanalysis in ten streams of audit research: audit practices, auditor judgments, audit litigation, detection of management fraud, impact of audit committees, audit fees, audit quality, auditor changes, audit qualifications, and prediction of financial distress. We tabulate 88 papers published in these streams between 1980 and 2003 that use choice-based or matched samples; we identify errors in 82 of these. We provide evidence that the broad course of research in some streams has been misdirected due to reliance upon unjustified results of these works.
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