Financial Accounting Blog

Friday, November 12, 2004

Sampling. Studies show that auditors often make inappropriate conclusions from sample evidence because they fail to take into consideration sampling risk in their measures. The Economist looks at the statistics behind a recently published study that attempted to measure Iraqi deaths from the war. One of the controversial points is the wide confidence interval that results from the researchers' methodology.
Statistically, 33 is a relatively small sample (though it is the best that could be obtained by a small number of investigators in a country at war). That is the reason for the large range around the central value of 98,000, and is one reason why that figure might be wrong. (Though if this is the case, the true value is as likely to be larger than 98,000 as it is to be smaller.) It does not, however, mean, as some commentators have argued in response to this study, that figures of 8,000 or 194,000 are as likely as one of 98,000. Quite the contrary. The farther one goes from 98,000, the less likely the figure is.