Article ID: | iaor19932031 |
Country: | United Kingdom |
Volume: | 43 |
Issue: | 8 |
Start Page Number: | 765 |
End Page Number: | 771 |
Publication Date: | Aug 1992 |
Journal: | Journal of the Operational Research Society |
Authors: | Bather J. |
Keywords: | programming: dynamic, finance & banking |
Auditing is based on random sampling from the records of a company. This paper considers a Bayesian model for determining the sample sizes by finding a balance between the cost of sampling and the risk of leaving major faults undiscovered. It leads to a dynamic programming problem which involves substantial computations, but a slightly different approach in which discrete sampling is replaced by a continuous search for faults produces more explicit solutions.