When an audit must be conducted that involves a tedious examination of a large inventory, the audit may be very costly and time consuming if each item in the inventory must be examined. In such situations, the auditor frequently obtains a random sample of items from the complete inventory and uses the results of an audit of the sampled items to check the validity of the company's financial statement. A large company’s financial statement claims an inventory that averages $ 600 per item. The following data are the auditor’s assessment of a random sample of 75 items from the company’s inventory. The values resulting from the audit are rounded to the nearest dollar.
a. Estimate the mean value of an item in the inventory using a 95% confidence interval.
b. Is there substantial evidence (a = .01) that the mean value of an item in the inventory is less than $ 600?
c. What is the target population for the above inferences?
d. Would normal distribution–based procedures be appropriate for answering the above questions?

  • CreatedNovember 21, 2015
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