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III. Summary and Recommendations
Pages 55-59

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From page 55...
... · Basic statistical problems in auditing arise when one wishes to estimate the total population error in an account. Relative to the main body of statistical methodology, these problems are nonstandard due to a unique feature of the data; audit data usually contains mosey zeros!
From page 56...
... For example, items with a zero book amount will not be selected under this sampling. The dollar unit sampling design adso permits the auditor to incorporate into the analysis prior knowledge that the errors are overstatements and Hat He maximum size of an error of an item is equal to its book amount.
From page 57...
... Except for the procedures that utilize Bayesian mesons, existing procedures are not effective for setting a good lower bound for accounting population errors. This failure is extremely senous; one particularly important situation involves the estimation of the adjustment of a fien's expense accounts by the Intemal Revenue Service (IRS)
From page 58...
... · In this age of widely available high speed computing equipment, it is reasonable to expect significantly greater use of computerintensive statistical methodologies. There is also a need for greater use of computers in the simulation of performance characteristics of existing methodologies, particularly as increased data sets become available to suggest more realistic simulation models.
From page 59...
... The initial emphasis of coordinated research activities between the auditing and statistics professions should focus upon seeking ways to encourage statisticians to become directly involved in the auditing environment In this way' statisticians would become more familiar with the statistical problems in auditing and especially with the characteristics of the data bases in this sewing. It is also recommended that accounting firms make audit data available for a wider research community than its own profession.

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