Statistical Techniques for Forensic Accounting: Understanding the Theory and Application of Data Analysis

8. Continuous Probability Distributions

Intuition is a poor guide when facing probabilistic evidence.

8.1. Introduction

The previous chapter presented concepts for discrete probability distributions, situations with a finite number of outcomes. In this chapter this discussion is extended to continuous probability distributions, or situations in which infinite outcomes are possible and the probability of any specific outcome is close to zero, hence of limited use. In an accounting and auditing context, the continuous probability distribution is relevant when the variables of interest are account balances. Account balances, or errors in those, presented in dollar amounts or percentages form, infinite continuous possibilities and are better represented ...