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| Teaching Since: | May 2017 |
| Last Sign in: | 399 Weeks Ago |
| Questions Answered: | 66690 |
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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Focus Problem: Benford’s Law Again, suppose you are the auditor for a very large corporation. The revenue file contains millions of numbers in a large computer data bank (see Problem 7). You draw a random samplen = 228of numbersfrom this file and r = 92 have a first nonzero digit of 1. Let p represent the population proportion of all numbers in the computer file that have a leading digit of 1.
i. Test the claim that p is more than 0.301. Use a = 0.01.
ii. If p is in fact larger than 0.301, it would seem there are too many numbers in the file with leading 1’s. Could this indicate that the books have been “cooked” by artificially lowering numbers in the file? Comment from the point of view of the Internal Revenue Service. Comment from the perspective of the Federal Bureau of Investigation as it looks for “profit skimming” by unscrupulous employees.
iii. Comment on the following statement: “If we reject the null hypothesis at level of significance a, we have not proved H0 to be false. We can say that the probability is a that we made a mistake in rejecting H0.” Based on the outcome of the test, would you recommend further investigation before accusing the company of fraud?
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