Assume you are planning the confirmation of accounts receivable. There are 2,000 customer accounts with a total book value of $5,643,200. Tolerable misstatement is set at $200,000, and expected misstatement is $40,000. The risk of incorrect acceptance is 30%. The ratio of expected to tolerable misstatement is 20%, and the ratio of tolerable misstatement to the population is 3.5% (round down to 3% for use in Exhibit).
a. What is the sample size?
b. What is the sampling interval?
c. What is the largest value you can use for a random start?
d. Using the following list of the first 15 items in your population a random start of $25,000, and a rounded sample interval of $100,000, identify the items to be included in your sample.

e. What is the probability of selecting each of the following population items, assuming a $100,000 sampling interval?

f. Why might the final sample size include fewer logical units than the computed samplesize?

Transcribed Image Text:

Item Book Value Cumulative Amount Sample Item Random Start 3,900 26,000 5,000 130,000 2,000 260,000 100 25,000 19,000 10,000 9,000 2,500 65,000 110,000 6,992 10 12 13 14 15 Book Vdue 3,900 26,000 130,000 360,000 Item Probability of Seledtion 6