# Question

You are the auditor of Jexel, an auto air conditioner service and repair company, and you have decided to use the mean-per-unit method to test the existence and gross valuation of recorded accounts receivable. The client’s records include 10,000 accounts with a total book value of $1,250,000. You decide to use tolerable misstatement of $182,000, an incorrect acceptance risk of 5 percent, and an incorrect rejection risk of 4.6 percent. Using generalized audit software, you estimated the standard deviation of the population as $25.

a. Determine the sample size.

b. Assume you tested the sample and got the following results: The mean audited value of the 25 accounts was $122. Assuming that the standard deviation of the sample’s audited value is also $25, will you accept the account as not being materially misstated? What is the projected misstatement for the population?

c. Assuming that the standard deviation of the sample’s audited value is $20, will you accept the account as not being materially misstated? Show your calculations. What is the projected misstatement for the population?

a. Determine the sample size.

b. Assume you tested the sample and got the following results: The mean audited value of the 25 accounts was $122. Assuming that the standard deviation of the sample’s audited value is also $25, will you accept the account as not being materially misstated? What is the projected misstatement for the population?

c. Assuming that the standard deviation of the sample’s audited value is $20, will you accept the account as not being materially misstated? Show your calculations. What is the projected misstatement for the population?

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