Question

Jones, CPA, believes the industry-wide deviation rate of client billing errors is 3. Jones has established a tolerable deviation rate of 5. Which sampling method should Jones use?

1) discovery sampling
2) attributes sampling
3) stratified sampling
4) variables sampling

Answer 1

Jones, CPA, should use attributes sampling to estimate the client billing error rate. To reduce sampling error, increasing the sample size is one effective method. The error bound of ±3 percent indicates the range of possible deviation from the sample statistic to the true population parameter.

Step-by-step explanation:

Jones, CPA, should use attributes sampling for the evaluation of client billing errors. Attributes sampling is a method used to estimate the rate of deviation in a population based on a sample. Given that Jones has an industry-wide expected deviation rate of 3% and a tolerable deviation rate of 5%, attributes sampling, which deals with the presence or absence of a certain quality (in this case, errors), would be the most appropriate method to assess compliance with the defined rate of billing errors in the industry.

To answer the supplementary questions:

• Increase the sample size to lower the sampling error.
• The error bound of ±3 percent represents the possible range within which the true value in the population might fall, given the sample results.