Design of Experiments Assignment

Questions: Aids and Questions for Article 2: Engle, T. J., and J. E. Hunton. 2001. The effects of small monetary incentives on response quality and ratss in the positive confirmation of account receivable balances. Auditing: A Journal ofPractice Theory 20(1) (March): 157-168. Aids: 1. Don't get lost in the details of the experiment. Concentrate on the main conclusions of the article and on the general method that the authors used to support their conclusions. 2. Like article I. this study us. LOG1T analysis. You may want to refer to your article I notes. Questions: 1. On p. 160, the authors assert that the audit environment has unique features that would cause one to question whether the research results of marketing and public opinion studies would apply to the audit context. For each of the factors listed by the authors, indicate how it might cause the effects of monetary incentives on response quality in auditing to differ from those in marketing/public opinion contexts. 2. The authors conclude that small monetary incentives reduce response quality. On what evidence do the authors base their conclusion? 3. Auditors confirm accounts receivable primarily for the validity (existence) assertion. What evidence, if any, does this study provide about the effectiveness of confirmations for testing the validity assertion? Is this "news" to practicing auditors? (Do not consider the effect of the small monetary incentives in answering these questions; i.e., consider the entire sample altogether.) 4. A secondary objective for accounts receivable confirmation is the valuation assertion. What evidence, if any, does this study provide about the effectiveness of confirmations with respect to the valuation assertion? (Hint: Estimate the detection risk associated with confirmations in this study.) Is this -news" to practicing auditors? (Again, do not consider the effect of the small monetary incentives in answering these questions; i.e., group all the incentive conditions together.) 5. Answer either a. or b.: a. What methods (other than monetary incentives) could be used to increase response rate? b. What methods (other than monetary incentives) could be used to increase response quality? Answers: 1. In current era, as the discussion takes place and according to theories and researches, the effect of monetary incentives on response quality is not clear. In most of studies and researches while clarifying this issue, observation on survey of marketing or public opinion polling takes place. Whereas many things such as whether monetory incentives affect response quality in audit confirmation applications still remains question. Investigating the impact of small monitory incentives on response quality of confirmation request is primary goal of this research. It is clear that response rates and quality related to each other. Thus collection and examination of these factors takes place. 2. Authors concluded that the small monetary incentives reduce response quality. For the testing of their claim or hypothesis, they use the statistical test of hypothesis for proving that claim whether the small monetary incentives reduce the response quality or not. They use the statistical tests like t-test or ANOVA and then by using the p-value getting for this test, they reject or do not reject the null hypothesis regarding their claim. 3. To test the validity assertion, the effectiveness of confirmation is effective factor because we get variation factors due to this reason. Taking entire sample of monetary incentives we get the variation pattern among the different incentives. For this case, we choose entire sample by ignoring the small monetary incentives. 4. The estimated detection risk associated with the confirmations shows that the secondary objective for the accounts receivable confirmation is the valuation assertion. The estimated high or low risk confirms the different issues regarding the confirmations. 5. To increase the response rate or response quality, the method of response quality matrices is very useful for increasing the response rate or response quality. References: George Casella, Roger L. Berger, Statistical Inference, 2nd ed., Duxbury Press, 2001. David R. Cox, D. V. Hinkley, Theoretical Statistics, Chapman Hall/CRC, 1979. Peter J. Bickel, Kjell A. Doksum, Mathematical Statistics, Volume 1, Basic Ideas and Selected Topics, 2rd ed. Prentice Hall, 2001. T. S. Ferguson, Mathematical Statistics: A Decision Theoretic Approach, Academic Press, Inc., New York, 1967 Harald Cramr, Mathematical Methods of Statistics, Princeton, 1946