Discussion of an Analysis of the Auditor's Uncertainty about Probabilities, Contemporary Accounting Research
The main objective of Larsson and Chesley's (1986) paper is to provide a framework for an auditor to assign a probability measure associated with uncertainty or ambiguity related to certain types of events arising in an audit environment. For this framework the authors extracted and applied the general methodology developed by Larsson (1976) in his doctoral thesis, which extends a subjective probability measure from a known s-algebra ? to an unknown and an extended class, such that an auditor (decision maker), when faced with an extended lottery on events in, can still come up with the use of utility theory maximization to rank the decisions. The authors make the following claims: (1) their methodology helps the auditor with this new audit tool of probability measure assessment; (2) their measure can capture a number of previously specified approaches by others in this area; and (3) their measure provides some "intuitive conclusions and some well-known mathematical properties."
Balachandran, Bala. 1986. Discussion of an Analysis of the Auditor's Uncertainty about Probabilities. Contemporary Accounting Research. 2(2): 283-287.