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The Wisdom of Statistics

The Wisdom of Statistics.

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The Wisdom of Statistics

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  1. The Wisdom of Statistics “America's poverty problem is not one of material scarcities but of abundant bad behavior. There are three simple behavioral rules for avoiding poverty: finish high school, produce no child before marrying, and no child before age 20. Only 8% of families who follow these rules are poor; 79% of those who do not are.” -- George Will

  2. Audit Effectiveness, Efficiency, & Risk Lowers Audit Lowers Audit Effectiveness Efficiency BETA RISK ROOR X ROIA X ALPHA RISK ROUR X ROIR X

  3. Substantive Test Sampling TWO COMMON METHODS • Probability Proportionate to Size • sample overstatements & extend results to population • Stats based on 1 tailed test of attribute sampling • Variables sampling • sample account $ values& extend result to population • Mean-per-unit (sample mean x N) • Difference estimation (ave.AV-ave.BV x N)

  4. PPS Sampling Advantages • No Standard Deviation calculation required • Automatic stratification • Smaller sample size

  5. Sample Size Determinants

  6. Steps in PPS Sampling • Determine the relevant population • Calculate the sample size (p. 413) • Draw the sample (p. 413) • Evaluate the results (p.414) • Projected Error • Precision • Upper error limit

  7. Steps in Variables Sampling • Determine the relevant population • Determine the sample size (p. 402-4) • Select the sample • Evaluate the results • Precision (p. 403-4) • Reliability/Confidence level (p.403-5)

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