An Application of Data Envelopment Analysis to the Evaluation of Audit Risk
17 Pages Posted: 15 Nov 2002
This article demonstrates how data envelopment analysis can be used to weight audit risk factors. Data from a previously reported study applying the analytic hierarchy process is used to facilitate a comparison between these two methods. Data envelopment analysis (DEA) has several advantages, including the ability to accommodate a range of expert opinions on the importance of a specific risk factor, rather than using the median or mean value. DEA can be used to provide high-risk and low-risk assessments and provides benchmark audit units from which other units can be evaluated.
Keywords: analytic hierarchy process, audit risk, data envelopment analysis
JEL Classification: M49
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