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Probability Proportional to Size Sampling Method

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Please refer attached file for tables.

Use the following company data and the PPS Sampling Tables 1 & 2:

The recorded book value of these accounts is $3,460,000.
The company has a tolerable error of $63,460.
The anticipated error is $13,000.
The risk of incorrect acceptance is 5%.
The acceptable number of overstatements of misstatements is 2.

Use probability proportional to size (PPS) sampling to do the following:

A. Determine the reliability factor.
B. Determine the correct expansion factor.
C. Determine the sample size you should use.
D. Determine the sampling interval you should use.

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A. Determine the reliability factor.
Refer to the given Table 1. Look for the Row with 0 number and column with 5% risk of incorrect acceptance, we get value of 3.00.

Reliability factor=3.00

B. Determine the ...

Solution Summary

Probability Proportional to Size (PPS) sampling is a well known method in auditing. Solution to the given problem describes the steps to determine the important parameters of this technique like reliability factor, expansion factor, sample size and sampling interval.

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Please Include:

The page number from the attached pdf (Chapter 9) where the appropriate formula or guidance is located on how to solve the problem.

The steps involved in reaching the solution.
The solution.

1 In the business research scenario, the population is identified as 150 employees.
How many employees would need to respond to the survey to achieve a confidence interval of ±5 at the 95% level of confidence?
Note for #1: The formula you need to do this problem is not introduced in attached text.
2 Only 50% (75 of 150) of those invited agreed to participate. What is the new confidence interval? Is this good enough? Why or why not?

3 As a condition of employment, military applicants must pass a drug test. Last month, of the
440 applicants tested 28 failed. Develop a 99 percent confidence interval for the proportion of
applicants that fail the test. Would it be reasonable to conclude that more than 10 percent of the
applicants are now failing the test each month?

4 In addition to the testing of applicants, Kadena randomly tests members throughout the year.
Last year in the 800 random tests conducted, 11 employees failed the test. Would it be
reasonable to conclude that the incidence of drug abuse is less than 2 percent for the total
population?

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