Balancing the odds: stochastic accounting
Michael Mainelli
(Michael Mainelli is a co‐founder of Z/Yen, a consultancy specialising in risk/reward strategies to improve business performance.)
Ian Harris
(Ian Harris is a co‐founder of Z/Yen, a consultancy specialising in risk/reward strategies to improve business performance.)
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Abstract
The use of a deterministic numeric paradigm in auditing and accounting may well be the root cause of many current problems. This paper argues that risk‐based accounting methods should start using probabilistic inputs which would show resultant distributions as output. “Stochastic accounting” would better inform users of financial information. Although this recommendation would change the way accounts were produced and presented, it would lead to more usable financial information.
Keywords
Citation
Mainelli, M. and Harris, I. (2002), "Balancing the odds: stochastic accounting", Balance Sheet, Vol. 10 No. 2, pp. 22-27. https://doi.org/10.1108/09657960210433140
Publisher
:MCB UP Ltd
Copyright © 2002, MCB UP Limited