All Times ET
Keywords: statistical sample design, tax auditing, stratification, audit sampling
The cumulative square root of the frequency method is a generally accepted statistical method 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). The method is often compared to other stratification techniques that are based on quicker approximate methods or on complex methods requiring numerical integration or requiring specific distributional assumptions. More complex methods such as those that use intensive iterative bound constructions often start with Dalenius' approach for the preliminary boundaries. 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' originally proposed method by applying the method to frequency distributions based on varying class widths and expanding the tested populations (from the 2018 research) based on data with varying distributional assumptions including uniformly and normally distributed data and highly skewed data.