Recall that Benford's Law claims that numbers chosen from very large data files tend to have "1" as the first nonzero digit disproportionately often. In fact, research has shown that if you randomly draw a number from a very large data file, the probability of getting a number with "1" as the leading digit is about 0.301. Now suppose you are an auditor for a very large corporation. The revenue report involves millions of numbers in a large computer file. Let us say you took a random sample of n = 225 numerical entries from the file and r = 51 of the entries had a first nonzero digit of 1. Let p represent the population proportion of all numbers in the corporate file that have a first nonzero digit of 1.(i) Test the claim that p is less than 0.301. Use ? = 0.05. (ii) If p is in fact less than 0.301, would it make you suspect that there are not enough numbers in the data file with leading 1's? Could this indicate that the books have been "cooked" by "pumping up" or inflating the numbers? Comment from the viewpoint of astockholder. Comment from the perspective of the Federal Bureau of Investigation as it looks for money laundering in the form of false profits.O Yes. The revenue data file does not seem to include more numbers with higher first nonzero digits than Benford's law predicts.O No. The revenue data file seems to include more numbers with higher first nonzero digits than Benford's law predicts.O No. The revenue data file does not seem to include more numbers with higher first nonzero digits than Benford's law predicts.O Yes. The revenue data file seems to include more numbers with higher first nonzero digits than Benford's law predicts.(ii) Comment on the following statement: If we reject the null hypothesis at level of significance a, we have not proved H, to be false. We can say that the probability is a that we made a mistake in rejecting Ho: Based on the outcome of the test, would yourecommend further investigation before accusing the company of fraud?O we have not proved Ho to be false. Because our data lead us to accept the null hypothesis, more investigation is not merited.O we have not proved Ho to be false. Because our data lead us to reject the null hypothesis, more investigation is not merited.O we have proved H, to be false. Because our data lead us to reject the null hypothesis, more investigation is not merited.O we have not proved Ho to be false. Because our data lead us to reject the null hypothesis, more investigation is merited. Recall that Benford's Law claims that numbers chosen from very large data files tend to have "1" as the first nonzero digit disproportionately often. Infact, research has shown that if you randomly draw a number from a very large data file, the probability of getting a number with "1" as the leading digit isabout 0.301. Now suppose you are an auditor for a very large corporation. The revenue report involves millions of numbers in a large computer file. Let ussay you took a random sample of n = 225 numerical entries from the file and r = 51 of the entries had a first nonzero digit of 1. Let p represent thepopulation proportion of all numbers in the corporate file that have a first nonzero digit of 1.

Given information: Sample size, n = 225 The number of entries that had a first nonzero digit of 1 is…

Answered: Recall that Benford's Law claims that…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

See similar textbooks

Related questions

Concept explainers

Question

Recall that Benford's Law claims that numbers chosen from very large data files tend to have "1" as the first nonzero digit disproportionately often. In fact, research has shown that if you randomly draw a number from a very large data file, the probability of getting a number with "1" as the leading digit is about 0.301. Now suppose you are an auditor for a very large corporation. The revenue report involves millions of numbers in a large computer file. Let us say you took a random sample of n = 225 numerical entries from the file and r = 51 of the entries had a first nonzero digit of 1. Let p represent the population proportion of all numbers in the corporate file that have a first nonzero digit of 1.

(i) Test the claim that p is less than 0.301. Use ? = 0.05.

(ii) If p is in fact less than 0.301, would it make you suspect that there are not enough numbers in the data file with leading 1's? Could this indicate that the books have been "cooked" by "pumping up" or inflating the numbers? Comment from the viewpoint of a
stockholder. Comment from the perspective of the Federal Bureau of Investigation as it looks for money laundering in the form of false profits.
O Yes. The revenue data file does not seem to include more numbers with higher first nonzero digits than Benford's law predicts.
O No. The revenue data file seems to include more numbers with higher first nonzero digits than Benford's law predicts.
O No. The revenue data file does not seem to include more numbers with higher first nonzero digits than Benford's law predicts.
O Yes. The revenue data file seems to include more numbers with higher first nonzero digits than Benford's law predicts.
(ii) Comment on the following statement: If we reject the null hypothesis at level of significance a, we have not proved H, to be false. We can say that the probability is a that we made a mistake in rejecting Ho: Based on the outcome of the test, would you
recommend further investigation before accusing the company of fraud?
O we have not proved Ho to be false. Because our data lead us to accept the null hypothesis, more investigation is not merited.
O we have not proved Ho to be false. Because our data lead us to reject the null hypothesis, more investigation is not merited.
O we have proved H, to be false. Because our data lead us to reject the null hypothesis, more investigation is not merited.
O we have not proved Ho to be false. Because our data lead us to reject the null hypothesis, more investigation is merited.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

$Point Estimation, Limit Theorems, Approximations, and Bounds$

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, statistics and related others by exploring similar questions and additional content below.

Similar questions