A certified public accountant (CPA) has found that nine of

Chapter 3, Problem 73E

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QUESTION:

A certified public accountant (CPA) has found that nine of ten company audits contain substantial errors. If the CPA audits a series of company accounts, what is the probability that the first account containing substantial errors

a is the third one to be audited?

b will occur on or after the third audited account?

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QUESTION:

A certified public accountant (CPA) has found that nine of ten company audits contain substantial errors. If the CPA audits a series of company accounts, what is the probability that the first account containing substantial errors

a is the third one to be audited?

b will occur on or after the third audited account?

ANSWER:

Step 1 of 3

Let X be the number of the company accounts which containing substantial errors.

Given

The Probability that an account contains substantial error (Probability of success),

\(\begin{aligned}
\mathrm{P} & =\frac{9}{10} \\
& =0.9
\end{aligned}\)

\(\Rightarrow\) Probability that an account does not contains substantial error,

\(\begin{aligned}
\mathrm{q} & =1-\mathrm{p} . \\
& =1-0.9 \\
& =0.1
\end{aligned}\)

So we can say that, X follows the geometric distribution with probability of success 0.9.

Thus, the probability density function of X:

\(\mathrm{P}(\mathrm{x})=q^{x-1} p, \mathrm{x}=1,2,3 . .\)

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