2. An inspector for the IRS is auditing a mid-sized firm. She only has half a da

Question

2. An inspector for the IRS is auditing a mid-sized firm. She only has half a day to go through all the books and decides to inspect a sample of the invoices to see if she should start a fraud investigation (which would free up additional auditing resources). As a first step, she pulls 300 invoices at random for further inspection. 12 of these show inaccuracies. 3. Let’s assume the IRS normally only launches a full scale investigation when they suspect more than 3% of all invoices contain errors. Given the 12 invoices she found in her sample, what is the probability that more than 3% of all invoices have inaccuracies?

Explanation / Answer

3. Let’s assume the IRS normally only launches a full scale investigation when they suspect more than 3% of all invoices contain errors. Given the 12 invoices she found in her sample, what is the probability that more than 3% of all invoices have inaccuracies?

Proportion or probability is 12 / 300 = 0.04

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.