An Auditing Firm Has Developed a Set of Criteria for Determining

Essay

An auditing firm has developed a set of criteria for determining whether a particular account (and its balance)is in error.Historically,at companies where the gross sales are under $25 million,they know that of balances that were in error,75 percent were regarded as unusual.Assume Company A shows a history of only 10 percent of the account balances being in error and it also shows that 25 percent of the account balances were unusual.What are the states of nature and the experimental outcomes?