Bayesian Inference for Rare Errors in Populations with Unequal Unit Sizes
David J. Laws, Anthony O’Hagan · Journal of the Royal Statistical Society Series C (Applied Statistics) · 2000
SUMMARY We describe a Bayesian model for a scenario in which the population of errors contains many 0s and there is a known covariate. This kind of structure typically occurs in auditing, and we use auditing as the driving application of the method. Our model is based on a categorization of the error population together with a Bayesian nonparametric method of modelling errors within some of the categories. Inference is through simulation. We conclude with an example based on a data set provided by the UK’s National Audit Office.