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The Internal Revenue Service is considering auditing all income tax returns which show a certain…

The Internal Revenue Service is considering auditing all income tax returns which show a certain…

The Internal Revenue Service is considering auditing all income tax returns which show a certain set of common characteristics on the assumption that those characteristics in combination flag an attempt at tax evasion. They want to test this hypothesis and want to run a risk of no more than one percent of implementing this policy when the proportion of returns which indeed reveal attempts at evasion is less than ten percent.