2. Non-statistical Sampling for Substantive Procedures - 18 points The auditors wish to test the valuation of accounts receivable in the audit of General Mills Company. The client has $1,000,000 of total recorded receivables, composed of 2,000 accounts. The auditors have decided to use nonstatistical sampling and have determined the following: Tolerable misstatement Assessment of inherent and control risk Risk related to other substantive procedures $50,000 Moderate Moderate Combined Assessment of Inherent and Control Risk Maximum Slightly below maximum Moderate Low Risk That Other Substantive Procedures Fail to Detect Material Misstatement Slightly Below Maximum Maximum Moderate Low 3.0 2.7 2.3 1.9 2.7 2.4 2.0 1.6 2.3 2.1 1.6 1.2 1.9 1.6 1.2 1.0 a. Calculate the required sample size. (6 points) b. Assume that the auditors have tested the sample and discovered three misstatements: Book Value Audited Value $ 100 512 900 $ 90 600 520 The remainder of the sample had an average value (book and audited) of $501.00. Use the ratio estimation method to calculate the projected misstatement of the population. (6 points) c. Use the results obtained in (b) to come to a conclusion about whether to "accept" or "reject the population. (6 points)