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

Author

Listed:
  • Robert Plante

    (Purdue University)

  • John Neter

    (University of Georgia)

  • Robert A. Leitch

    (University of Georgia)

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.

Suggested Citation

  • Robert Plante & John Neter & Robert A. Leitch, 1984. "A Lower Multinomial Bound for the Total Overstatement Error in Accounting Populations," Management Science, INFORMS, vol. 30(1), pages 37-50, January.
    • Handle: RePEc:inm:ormnsc:v:30:y:1984:i:1:p:37-50
    DOI: 10.1287/mnsc.30.1.37
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    Cited by:

    1. Ella Mae Matsumura & Kam†Wah Tsui & Wing†Keung Wong, 1990. "An extended multinomial†Dirichlet model for error bounds for dollar†unit sampling," Contemporary Accounting Research, John Wiley & Sons, vol. 6(2), pages 485-500, March.

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