Below is a transcript of a conversation between Mitch and AJ as they try to select a sample and evaluate the results.
AJ: Mitch, did you have a chance to select a sample of Hillsburg’s customers that you want me to mail an accounts receivable confirmation?
MB: Yes, here is a list of 30 account receivable balances that I want you to confirm.
AJ: How did you select this sample?
MB: Honestly, I just want this audit to be done and over with. With the COVID-19 restrictions in place I selected the 30 customers that I think are least affected by the restrictions.
AJ: Why?
MB: So, there is a better chance that they will reply back our confirmations. I am not up to wasting my time chasing after Hillsburg’s customers who fail to reply to our confirmations or doing some alternative procedures.
AJ: Talking about wasting time. Mitch, I finished testing the sample of 35 expense transactions.
MB: Great! We can get this audit section signed off, and there is only one more section to go, and we are done.
AJ: But Mitch. In four of the samples I found errors. Three are pretty small dollar-value errors, but the fourth sample has a significant error. Here, take a look.
MB: Let me see. I hope that you are wrong!

AJ: Why?
MB: Because if you really found a big dollar-value error then we will need to expand the sample size to 75 and work all weekend to finish testing the additional 40 samples. And I already have plans to go to a cottage with my friends.
AJ: Cottage with your friends? Really?
MB: Yes, really.
AJ: But . . . what about the COVID-19 restrictions?
MB: I don’t care about the restrictions, who knows if this virus is even real. We are going, the weather is supposed to be amazing! Want to join us?
AJ: Thanks for the offer, but no. Can you now please review my work?
MB: Okay. Let see here . . . . Oh boy, this is a real error, you got the evidence to support it. Now let’s see, if I add this error to the other three small errors that you found and make a quick calculation to project the total dollar value over the entire population that you tested . . . . Oh no!
AJ: What?
MB: This puts us over performance materiality!
AJ: And?
MB: And, either you substitute the sample with the big error for another sample that does not have an error or we work the weekend. The choice is yours.
AJ: What? I don’t understand.
MB: Forget about this error that you found.
AJ: Hmm?
MB: Just drop this one sample and pretend like you never selected it in the first place. Select another transaction to test in the place of the sample where you found the big error. Test the new transaction, finish your file, and come to the cottage with us. By the way, that special person who I know you really, really like, is probably coming to the cottage with us.
AJ: Oh?
MB: Yeah, and don’t tell Fran about the sample switching thing!

REQUIRED
1. Do you think that the sample of accounts receivable balances that Mitch wants AJ to confirm is appropriate and representative of the population? Explain.
2. What factors should Mitch consider when selecting a sample of accounts receivable balances?
3. Assume that AJ listens to Mitch and substitutes the sample which contains the large dollar-value error for another sample that doesn’t.
a. How would this impact sampling risk?
b. How would this impact nonsampling risk?
4. In the discussion between Mitch and AJ identify the relevant ethical responsibilities of auditors that were breached. Explain.