In light of a number of recent large-corporation bankruptcies, auditors are becoming increasingly concerned about the possibility of fraud. Auditors might be helped in determining the chances of fraud...

In light of a number of recent large-corporation bankruptcies, auditors are becoming increasingly concerned about the possibility of fraud. Auditors might be helped in determining the chances of fraud if they carefully measure cash flow. To evaluate this possibility, samples of midlevel auditors from CPA firms were presented with cash-flow information from a fraud case, and they were asked to indicate the chance of material fraud on a scale from 0 to 100. A random sample of 36 auditors used the cash-flow information. Their mean assessment was 36.21, and the sample standard deviation was 22.93. For an independent random sample of 36 auditors not using the cash-flow information, the sample mean and standard deviation were respectively 47.56 and 27.56. Test the assumption that population variances for assessments of the chance of material fraud were the same for auditors using cash-flow information as for auditors not using cash-flow information against a two-sided alternative hypothesis.