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In an article in Accounting and Business Research, Beattie and Jones investigate the use and abuse of graphic presentations in the
annual reports of United Kingdom firms. The authors found that 65 percent of the sampled companies graph at least one key financial
variable, but that 30 percent of the graphics are materially distorted (nonzero vertical axis, exaggerated trend, or the like). Results for
U.S. firms have been found to be similar,
(a) Suppose that in a random sample of 451 graphics from the annual reports of United Kingdom firms, 146 of the graphics are found to
be distorted. Find a point estimate of and a 95 percent confidence interval for the proportion of all U.K. annual report graphics that are
distorted. (Round your answers to 4 decimal places.)
Point estimate
The 95 percent confidence interval is
(b) Based on this interval, can we be 95 percent confident that more than 25 percent of all graphics appearing in the annual reports of
U.K. firms are distorted? Does this suggest that auditors should understand proper graphing methods?
Can we be 95 percent confident that more than 25 percent are distorted?
Does this suggest that auditors should understand proper graphing methods?
(c) Determine the sample size needed in order to be 95 percent confident that, the sample proportion of U.K. annual report graphics
that are distorted, is within a margin of error of 03 of n the population proportion of UK annual report graphics that are