Excel Audit Consultants (EAC) have engaged three audit trainees; Odhiambo, Koech and Mwai. After three months,...

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Excel Audit Consultants (EAC) have engaged three audit trainees; Odhiambo, Koech and Mwai. After three months, the audit supervisor notices that 3%, 5% and 4% of the accountants audited by Odhiambo, Koech and Mwai respectively have some procedural errors. The supervisor had distributed the accounts such that Odhiambo audited 40%. Koech audited 30% and Mwai audited 30% of the accounts. Required: (0) () The proportion of audited accounts with procedural errors. The probability that an account with an error is audited by either Koech or Mwai. (c) The finance manager of Apar Construction Ltd. has two investment proposals before him and he wishes to choose one of them. He will choose the project that offers him a higher expected net present value (NPV). In case both projects have the same NPV, he will prefer the project that has a lesser risk. The data for the two projects is given below: Possible outcomes Project X: Pessimistic Most likely Optimistic Project Y: Pessimistic Most likely Optimistic Probability of possible outcomes 0.25 0.50 0.25 0.25 0.50 0.25 Net present value Sh. million 1,500 5,000 9,000 - 10,000 5,000 20,500 Required: The project the finance manager would choose, given that risk is measured by the standard deviation. Excel Audit Consultants (EAC) have engaged three audit trainees; Odhiambo, Koech and Mwai. After three months, the audit supervisor notices that 3%, 5% and 4% of the accountants audited by Odhiambo, Koech and Mwai respectively have some procedural errors. The supervisor had distributed the accounts such that Odhiambo audited 40%. Koech audited 30% and Mwai audited 30% of the accounts. Required: (0) () The proportion of audited accounts with procedural errors. The probability that an account with an error is audited by either Koech or Mwai. (c) The finance manager of Apar Construction Ltd. has two investment proposals before him and he wishes to choose one of them. He will choose the project that offers him a higher expected net present value (NPV). In case both projects have the same NPV, he will prefer the project that has a lesser risk. The data for the two projects is given below: Possible outcomes Project X: Pessimistic Most likely Optimistic Project Y: Pessimistic Most likely Optimistic Probability of possible outcomes 0.25 0.50 0.25 0.25 0.50 0.25 Net present value Sh. million 1,500 5,000 9,000 - 10,000 5,000 20,500 Required: The project the finance manager would choose, given that risk is measured by the standard deviation.

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