VERCOR provides merger and acquisition consultants to assist corporations when an owner decides to offer the business for sale. One of their news releases, “Tax Audit Frequency Is Rising,” written by David L. Perkins Jr., a VERCOR partner, originally appeared in The Business Owner. Perkins indicated that audits of the largest businesses, those corporations with assets of $10 million and over climbed to 9,560 in the previous year. That was up from a low of 7,125 a year earlier. He indicated one in six large corporations was being audited.
a. Designate the type of probability assessment method that Perkins used to assess the probability of large corporations being audited.
b. Determine the number of large corporations that filed tax returns for the previous fiscal year.
c. Determine the probability that a large corporation was not audited using the relative frequency probability assessment method.