Marlin Company has suspected something "fishy" for several months. It has noticed that its profits have been slowly decreasing, while revenues have been increasing. After consulting with you, a fraud expert, the company has decided to investigate the purchasing patterns of its three purchasing agents—Curly, Larry, and Moe. You decide that a good method for investigation into the matter is examining a random sample of purchase invoices and verifying their accuracy and validity. Curly's invoices are numbered 0001 through 0999, Larry's are 1000 through 1999, and Moe's are 2000 through 2999. When you approach Curly, Larry, and Moe, they seem somewhat defensive. They begin to harass one another, blaming each other for the mess in which they are involved. Moe even twitches their noses and slaps their heads. Curly attempts to retaliate by poking Moe in the eye, but misses and hits Larry instead. When the three were done, the CFO, Mr. Rutin-Tutin, exclaimed, "Would you three stooges quit fooling around and produce the invoices immediately?" The three shuffled off to their offices, grumbling all the way. They returned a couple of hours later with photocopies of their invoices. When Mr. Rutin-Tutin asked where the original invoices were, they explained that they always copy and destroy the originals for easier storing purposes. Rather annoyed and fed up with the three morons, Mr. Rutin-Tutin directs them to return to their offices. He then asks if you think fraud is occurring, and you reply that there does appear to be something wrong. First of all, they could only produce photocopies of the invoices, which is not acceptable. The fact that it took them a couple of hours to produce these documents also causes suspicion. Mr. Rutin-Tutin hands you the stacks of photocopied invoices and tells you to do your thing. You decide to use discovery sampling as a first step in your examination of the invoices. The results of the sample will provide a basis for making inferences from the sample to the population.

Although discovery sampling allows inferences to be made about the population, there is still the possibility that the sample will not be representative of the population; this is labeled sampling risk. Generally, this risk is greater when the fraudulent records relate to a limited number of transactions and/or the fraud occurs at irregular intervals in the dataset.

a. True
b. False