Let p represent the population proportion of all numbers in the corporate fi le that have a fi rst nonzero digit of 1.

i. Test the claim that p is less than 0.301. Use a 5 0.01.

ii. If p is in fact less than 0.301, would it make you suspect that there are not enough numbers in the data fi le with leading 1’s? Could this indicate that the books have been “cooked” by “pumping up” or infl ating the numbers?

Comment from the viewpoint of a stockholder. Comment from the perspective of the Federal Bureau of Investigation as it looks for money laundering in the form of false profi ts.

iii. Comment on the following statement: “If we reject the null hypothesis at level of signifi cance

a, we have not proved H0 to be false. We can say that the probability is a that we made a mistake in rejecting H0.” Based on the outcome of the test, would you recommend further investigation before accusing the company of fraud?