Statistical Concepts
Statistical concepts are used in various aspects on industry. The
following highlights the use of statistics in these industries:
Accounting/Auditing, Insurance, and Medical (Pharmaceutical).
In the
accounting/auditing field, it is imperative that the auditor makes an effort to
determine that financial statements are stated accurately and free of material
error (appear to be stated accurately). To accomplish this task, auditors
utilize test methods that include statistical sampling of accounting
transactions -- payroll, accounts payable, accounts receivable, journal entries,
etc.. This statistical approach is used for validating (determining the
accuracy) financial statements through limited test work. This limited test work
is based on the statistical approach of how a population reacts -- ie, a small
sample of the population is generally representative of the entire
population.
The use of statistics provides the auditor with a tool that
provides comfort in the amount of test work required to achieve "adequate" scope
coverage to meet a representative sample of the financial scope. This use of
statistics provides an auditor with a lower cost approach to substantiate
accuracy -- this is important to both the auditing firm and the industry being
audited.
Another industry that utilizes statistics on a daily basis is
the insurance industry. In fact, this industry relies on statistics to help
forecast its bottom line results. The typical insurance company uses statistics
to determine approval rates for clients, while providing coverage (life,
medical, dental, etc.) and turning a profit.
For example, an insurance
company might use statistical concepts to determine the trend of a population.
This statistical approach might be used to determine the likelihood of a
population incurring extreme medical needs, birth rates, or surgery. The results
of this approach help the insurance company project the probability of incurring
medical, dental, and/or life claims and therefore, enables the company to
establish premium rates that delivery profitable results.
The
medical/pharmaceutical industry is another major industry segment that utilizes
statistical concepts on a daily basis. Statistical concepts are used to
determine the appropriateness of distributing new drugs (ie, determine the
likelihood of drug interactions).
This is an example of how statistics
truly have a very favorable or detrimental impact on daily life. Again,
population trending is used to determine whether or not a drug should be
released to the general public (based on the results of a small sample size) for
consumption.
As indicated, statistical concepts play a key role in
various industries. These concepts determine not only how we work but also how
we live.