arXiv 7 Apr 2026 · Finance — Statistical Finance
arXiv:2604.06116 · PDF · DOI · OpenAlex · Extracted main text
Financial statement auditing is conducted under a risk-based evidence approach to obtain reasonable assurance. In practice, auditors often perform additional sampling or related procedures when an initial sample does not provide a sufficient basis for a conclusion. Across jurisdictions, current standards and practice manuals acknowledge such extensions, while the statistical design of sequential audit procedures has not been fully explored. This study formulates audit sampling with additional, sequentially collected items as a sequential testing problem for a finite population under sampling without replacement. We define null and alternative hypotheses in terms of a tolerable deviation rate, specify stopping and decision rules, and formulate exact sequential boundary conditions in terms of finite-population error probabilities. For practical implementation, we calibrate those boundaries by Monte Carlo simulation at least-favorable deviation rates. The exact design yields ex ante control of decision error probabilities, and the simulation-based implementation approximates that design while allowing the computation of expected stopping times. The framework is most naturally suited to attribute auditing and deviation-rate auditing, especially tests of controls, and it can be extended to one-sided, two-stage, and truncated designs.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Financial Reporting Council (2025) ISA (UK) 530: Audit sampling | 0.941 | 6 | 4 | 83% |
| 2 | Auditing and Assurance Standards Board (2021) ASA 530: Audit sampling | 0.928 | 5 | 4 | 80% |
| 3 | Public Company Accounting Oversight Board (2026) AS 2315: Audit sampling | 0.843 | 4 | 4 | 75% |
| 4 | U.S. Government Accountability Office and Council of the Inspectors… (2025) Financial audit manual, volume 1 | 0.843 | 4 | 3 | 75% |
| 5 | Auditing and Assurance Standards Committee (2022) Research document no. 1: Audit and statistical sampling, 2022 | 0.511 | 2 | 2 | 50% |
| 6 | Auditing Standards Committee (2022) Statement no. 200: Overall objectives of the independent auditor and the conduct of an audit in accordance with auditing standar… | 0.511 | 2 | 2 | 50% |
| 7 | Auditing Standards Committee (2022) Statement no. 530: Audit sampling, 2022b | 0.511 | 2 | 2 | 50% |
| 8 | Alison Hubbard Ashton and Robert H. Ashton (1988) Sequential belief revision in auditing | 0.511 | 2 | 2 | 50% |
| 9 | Business Accounting Council (2002) On the revision of auditing standards, 2002 | 0.511 | 2 | 2 | 50% |
| 10 | Business Accounting Council (2020) Auditing standards, 2020 | 0.511 | 2 | 2 | 50% |
Showing the top 10 of 32 scored citations.