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A Lower Multinomial Bound for the Total Overstatement Error in Accounting Populations

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Author Info

  • Robert Plante

    (Purdue University)

  • John Neter

    (University of Georgia)

  • Robert A. Leitch

    (University of Georgia)

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    Abstract

    A lower bound on the total error in an accounting population is required, in conjunction with the point estimate of the total error amount and the upper bound, when adjusting an account to determine the amount of the adjustment. This paper extends the multinomial methodology for obtaining an upper bound on the total overstatement (or understatement) error in an accounting population to the determination of a lower bound on the total overstatement (or understatement) error. The methodology for obtaining a lower multinomial bound differs in several important respects from that for obtaining an upper bound. The proposed lower bound may be computed for up to 25 errors in the sample and provides tighter limits than the widely used Stringer bound.

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    File URL: http://dx.doi.org/10.1287/mnsc.30.1.37
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 30 (1984)
    Issue (Month): 1 (January)
    Pages: 37-50

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    Handle: RePEc:inm:ormnsc:v:30:y:1984:i:1:p:37-50

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    Related research

    Keywords: accounting/adjustments: modeling; nonlinear optimization: algorithm development;

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