While reviewing the sample of audit fees, a senior accountant for the firm notes

Question

While reviewing the sample of audit fees, a senior accountant for the firm notes that the fee charged by the firm's accountants depends on the complexity of the return. A comparison of actual charges therefore might not provide the information needed to set next year's fees. To better understand the fee structure, the senior accountant requests a new sample that measures the time the accountants spent on the audit. Last year, the average hours charged per client audit was 2.98 hours. A new sample of 15 audits times

shows the following times in hours. Complete parts a and b below.

4.5, 4.6, 4.4

2.8, 3.3, 3.1

3.2, 4.1, 3.7

3.6, 3.8, 3.1

3.7, 3.3, 3.4

1)Assume the conditions necessary for inference are met. Find a 95% confidence interval for the mean audit time.

The 95% confidence interval is from ??? to ???.

2) Based on the answer above, do you think the audit times have, in fact, increase?

Explanation / Answer

a) Mean of the sample will be = 3.64

Sample Standard deviation will be calculated as = 0.551362

Margin of error = (2.1448*0.551362)/Sqrt(15) = 0.3053

95% Interval

(3.64-0.3053, 3.64+0.3053)

= (3.3345, 3.9453)

b) Since, it does not contain and it is greater than zero, audit times have, in fact, increase

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