|
The Effect of Stopping Rules on the Evaluation of Audit Evidence
Peter R. Gillett, Rutgers University
Marietta Peytcheva, Rutgers University
ABSTRACT. Does the value of audit evidence depend on whether a fixed sample was taken, or sampling was stopped when some specified outcome was achieved? The two main schools of statistical thought hold opposing views on whether stopping rules should matter: Bayesians say not, frequentists say yes. We test empirically whether stopping rules influence audit judgment in the area of internal controls. In a 2×2×2×2 mixed between- and within-subjects experiment, subjects assess the strength of audit evidence obtained using different stopping rules. We find that the stopping rule used strongly influences subjects' judgment: audit evidence obtained using an optional early stopping rule is attributed less weight than evidence obtained using a fixed sample. Our results are consistent with the normative frequentist paradigm (Gigerenzer 1994); although a Bayesian approach might lead to greater efficiency in audit sampling, Bayesian assumptions conflict with the judgment of subjects in our study.
Full-Text is no longer available online. Please contact the author(s) for more information about this manuscript.
Back to Session Listing
|