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Derks, K, de Swart, J, Wagenmakers, E-J and Wetzels, R (2021)

The Bayesian Approach to Audit Evidence: Quantifying Statistical Evidence using the Bayes Factor

Preprint PsyArXiv; last accessed July 29, 2021.

ISSN/ISBN: Not available at this time. DOI: 10.31234/osf.io/kzqp5



Abstract: The impact of statistical methods on the audit practice is growing because of the increasing availability of audit data and the statistical methods to analyze these data. A key aspect in the statistical approach to auditing is assessing the strength of evidence for or against a hypothesis. Unfortunately, the often-used frequentist statistical methods cannot provide the statistical evidence that audit standards demand directly nor easily. In this article we discuss an alternative approach that can provide this evidence: Bayesian inference. Firstly, we explore the philosophical differences between frequentist and Bayesian inference. Secondly, we discuss misconceptions in the interpretation of frequentist statistical evidence, and finally we discuss how Bayesian inference allows the auditor to obtain and interpret statistical evidence in line with audit standards via its alternative to the p value, the Bayes factor.


Bibtex:
@misc{, title={The Bayesian Approach to Audit Evidence: Quantifying Statistical Evidence using the Bayes Factor}, url={psyarxiv.com/kzqp5}, DOI={10.31234/osf.io/kzqp5}, publisher={PsyArXiv}, author={Derks, Koen and de swart, jacques and Wagenmakers, Eric-Jan and wetzels, ruud}, year={2021}, month={Jul}, }


Reference Type: Preprint

Subject Area(s): Accounting, Statistics