In Smith, Inc., Rachel Robertson wishes to use mean-per-unit sampling to evaluate the reasonableness of the book
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Question:
In Smith, Inc., Rachel Robertson wishes to use mean-per-unit sampling to evaluate the reasonableness of the book value of the accounts receivable of Smith, Inc. Smith has 8,900 receivable accounts with a total book value of $1,515,000. Robertson estimates the population's standard deviation to be equal to $30. After examining the overall audit plan, the auditors believe that the account's tolerable misstatement is $52,000 and that a risk of incorrect rejection of 5 percent and risk of incorrect acceptance of 10 percent is appropriate. Use Figure 9.8. (Do not round any division. Round other computations and the final answers to the nearest whole value.) |
Required: |
a. | Calculate the required sample size. (Roundup your final answer to the next whole number.) |
Sample Size: | |
Assuming the following results: | |
Book value of items in sample = $158 | |
Average audited value of items in sample = $149 | |
Standard deviation of sample = $35 |
b. | Use the mean-per-unit method to: |
(1) | Calculate the point estimate of the account's audited value. |
Estimated of the account's audited value: | |
(2) | Calculate the projected misstatement for the population. |
Projected Misstatement: | |
(3) | Calculate the adjusted allowance for sampling risk. |
Adjusted Allowance for Sampling Risk: | |
(4) | State the auditors' conclusion in this situation (accept or reject). | ||||
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Related Book For
Principles of Auditing and Other Assurance Services
ISBN: 978-0078025617
19th edition
Authors: Ray Whittington, Kurt Pany
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