Question
An accounting firm serves many companies (clients). Each client submits an annual financial report to the firm for auditing. The report may be fraudulent (denoted
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An accounting firm serves many companies (clients). Each client submits an annual financial report to the firm for auditing. The report may be fraudulent (denoted by class 1 or C1) or may be truthful (denoted by class 2 or C2). Each client may or may not have legal trouble before (denoted by x1) and may be of either small or large capital size (denoted by x2). Please compute the propensity of a new client submitting fraudulent report using the pivot tables below.
Prior Legal (x1 = 1)
No Prior Legal (x1 = 0)
Total
Fraudulent (C1)
55
65
120
Truthful (C2)
200
680
880
Total
255
745
1000
Small (x2 = 1)
Large (x2 = 0)
Total
Fraudulent (C1)
100
20
120
Truthful (C2)
100
780
880
Total
200
800
1000
Round your answers to 3 digits after the decimal point.
P(x1 = 1 | C1) =
P(x1 = 0 | C1) =
P(x2 = 1 | C1) =
P(x2 = 0 | C1) =
P(x1 = 1 | C2) =
P(x1 = 0 | C2) =
P(x2 = 1 | C2) =
P(x2 = 0 | C2) =
P(C1) =
P(C2) =
Given a new client with legal trouble before (x1 = 1) with small size (x2 = 1), what is the propensity of this client submitting a fraudulent report?
P(C1 | x1 = 1, x2 = 1) =
Given a new client with legal trouble before (x1 = 1) with small size (x2 = 1), what is the propensity of this client submitting a truthful report?
P(C2 | x1 = 1, x2 = 1) =
Given a new client with no legal trouble before (x1 = 0) and large size (x2 = 0), what is the propensity of this client submitting a fraudulent report?
P(C1 | x1 = 0, x2 = 0) =
Given a new client with no legal trouble before (x1 = 0) and large size (x2 = 0), what is the propensity of this client submitting a truthful report?
P(C2 | x1 = 0, x2 = 0) =
Given a new client with no legal trouble before (x1 = 0) and small size (x2 = 1), what is the propensity of this client submitting a fraudulent report?
P(C1 | x1 = 0, x2 = 1) =
Given a new client with no legal trouble before (x1 = 0) and small size (x2 = 1), what is the propensity of this client submitting a truthful report?
P(C2 | x1 = 0, x2 = 1) =
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