In reviewing the results of a difference estimation calculation, an in-charge auditor, Roger Murphy, concluded that the confidence limits were larger than he could accept. In examining the details of the calculation, he determined that the point estimate of the population was nearly zero, but the standard deviation was large. He decided that there must be an error in the calculation, since it was impossible to get a small point estimate and a large standard deviation. His assistant, Lannell Tigg, expressed a different viewpoint. She stated that the problem was simply the failure to take a sufficiently large sample size. Tigg ended her explanation by informing Murphy that an increase in the sample size would automatically reduce the population stand¬ ard deviation and thereby reduce the confidence limits.
Required :

a. Explain how it is possible to have a small point estimate in the population and a large standard deviation when difference estimation is used.

b. Was Tigg’s explanation of the way to reduce the population standard deviation correct? Discuss.