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Activity Number:
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664
- Making an Impact with Statistical Auditing
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Type:
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Contributed
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Date/Time:
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Thursday, August 1, 2019 : 10:30 AM to 12:20 PM
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Sponsor:
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Statistical Auditing Interest Group
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Abstract #306544
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Title:
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Construction of Strata Boundaries in Tax Auditing
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Author(s):
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Zachary Rhyne* and Roger C. Pfaffenberger
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Companies:
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Ryan, LLC. and Ryan, LLC
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Keywords:
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statistical sampling;
tax auditing;
cumulative square root of the frequency;
class width
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Abstract:
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The cumulative square root of the frequency method is a generally accepted statistical technique used for the construction of strata boundaries in stratified sampling. Many statistical consultants and state and federal taxing and auditing agencies utilize this statistical method originally developed by Dalenius and Hodges (1959). But there is a general lack of guidance on the determination and effects of interval (i.e., class) widths. Dalenius and Hodges originally proposed the application of their method using frequency distributions with class widths of 5 units. In this paper, we present the results of empirical tests to contrast Dalenius’ method with different class widths and to other approximate, non-iterative methods using several typical skewed accounting populations.
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Authors who are presenting talks have a * after their name.
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