Application of Two Gamma Distributions Mixture to Financial Auditing

Janusz L. Wywiał ()
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Janusz L. Wywiał: University of Economics in Katowice

Sankhya B: The Indian Journal of Statistics, 2018, vol. 80, issue 1, No 1, 18 pages

Abstract: Abstract The considered problem can be treated as a particular topic in the field of testing some substantive hypothesis in financial auditing. The main theme of the paper is the well-known problem of testing hypothesis on admissibility of the population total of accounting errors amounts. The set of items with non-zero errors amounts is the domain in the accounting population. The book amounts are treated as values of a random variable which distribution is a mixture of the distributions of correct amount and the distribution of the true amount contaminated by error. The mixing coefficient is equal to the proportion of the items with non-zero errors amounts. The mixture of two gamma distributions is taken into account. The well-known method of moments and likelihood method are proposed to estimate parameters of distribution. It let us construct some statistic to test the outlined hypothesis. Moreover, the well-known likelihood ratio test is considered.

Keywords: Statistical auditing; Accounting error; Mixture of probability distribution; Method of moments; Likelihood ratio test; Primary: 62H15; Secondary: 91B28 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s13571-018-0154-5

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