This paper is a revision of an earlier version presented at the European Econometric Meetings, 1982

Several new methods of evaluatIng dollar-unit samples have been proposed recently for use in auditing. This paper presents results of a simulation study that compared four of these new methods. Additional simulations on alternative forms of two of these are also presented. Evidence on the reliability and relative size of the upper error bounds for each method is provided for 2,160 different combinations of sample sizes, confidence levels, and types of accounting populations. The results provide a comprehensive analysis of the capabilities of these methods. All four methods have strengths and weaknesses. The Multinomial Dirichlet bound is quite reliable but very conservative and (as formulated) not able to utilize understatement errors. The two versions of the Cox and Snell bound that were tested (with different priors) varied considerably in their reliability over a range of confidence levels. While not without an occasional reliability problem, test results for the Moment Method bound and one of the two Bayesian-Normal bounds were largely favorable.

[Several new methods of evaluating dollar-unit samples have been proposed recently for use in auditing. This paper presents results of a simulation study that compared four of these new methods. Additional simulations on alternative forms of two of these are also presented. Evidence on the reliability and relative size of the upper error bounds for each method is provided for 2,160 different combinations of sample sizes, confidence levels, and types of accounting populations. The results provide a comprehensive analysis of the capabilities of these methods. All four methods have strengths and weaknesses. The Multinomial Dirichlet bound is quite reliable but very conservative and (as formulated) not able to utilize understatement errors. The two versions of the Cox and Snell bound that were tested (with different priors) varied considerably in their reliability over a range of confidence levels. While not without an occasional reliability problem, test results for the Moment Method bound and one of the two Bayesian-Normal bounds were largely favorable.]

Reviews the book 'Accounting and Information Systems,' 2nd ed., by Joseph W. Wilkinson.

Reviews the book 'Database Processing for Microcomputers,' by David M. Kroenke and Donald E. Nilson.

[Previous market-based research has generally failed to detect significantly negative market price reaction to the issuance of SFAS No. 8. Using standardized abnormal returns, this study re-examines the issue. Reaction to events culminating in the issuance of SFAS No. 52 is also studied. Finally, since the accounting method used prior to SFAS No. 8 may be related to the costs imposed by SFAS No. 8, the method is determined and its effect on the observed market reactions is investigated. Our results indicate an overall negative reaction to SFAS No. 8, with a positive reaction to SFAS No. 52. In addition, the pre-SFAS No. 8 method of accounting for foreign currency translation is found to be related to the market reactions to SFAS No. 8 and SFAS No. 52 in mixed and unpredictable ways.]