3. Assume that 25% of all accounting audits identify an accounting error and tha

Question

3. Assume that 25% of all accounting audits identify an accounting error and that 8 audits were completed. The variable of interest is the number of audits that identify an accounting error out of the 8 audits. The distribution of this variable is described as x-Bin-8, p=0.25). Use this information to answer the questions below. Use this online calculator, if you want: http://stattrek.com/online- calculator/binomial.aspx a. What is the expected number of audits that will identify accounting errors? b. What is the probability of 2 or more accounting errors being identified in the 8 c. What is the probability of 3 or more accounting errors being identified in the 8 d. What is the probability of 4 or more accounting errors being identified in the B e. What is the probability of 5 or more accounting errors being identified in the 8 f. What is the probability of 6 or more accounting errors being identified in the 8 audits? audits? audits? audits? audits?

Explanation / Answer

Solution:-

The below given answers are calculated using the Binomial calculator.

a) Expected value of Binomial distribution = np = 8 * 0.25 = 2

b) P(X > 2) = 0.6329

c) P(X > 3) = 0.3215

d) P(X > 4) = 0.1138

e) P(X > 5) = 0.0273

f) P(X > 6) = 0.0042

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