During a professional development program at a CPA firm, an audit manager was instructing several younger staff members on how to calculate confidence intervals in the accounts receivable area by using difference estimation. As part of the discussion, he explained the importance of the population size in calculating the point estimate of the total error and the precision interval for the population. He ended his talk by informing the group that a 20 percent error in counting the number of accounts in the population would probably result in a misleading statistical calculation.

At that point, one of the staff members raised his hand and said that these conclusions were inconsistent with what he had learned about using attributes sampling. He said a statistics professor had explained to him when he was in college that the finite correction factor, which is affected by the population size, could frequently be ignored in variables sampling.

Required :

a. Explain why the population size is far more important for making variables sampling calculations than it is for attributes sampling.

b. Explain how the population size affects the statistical results in variables sampling in more ways than only by the finite correction factor.