Question: Brittany Petrof wishes to use classical variables sampling to evaluate the reasonableness of the book value of the accounts receivable of Littler, Inc. Littler has

Brittany Petrof wishes to use classical variables sampling to evaluate the reasonableness of the book value of the accounts receivable of Littler, Inc. Littler has 10,000 receivable accounts with a total book value of $1,500,000. Petrof estimates the populations standard deviation to be equal to $25. After examining the overall audit plan, the Petrof believes that the accounts tolerable misstatement is $60,000, and that a risk of incorrect rejection of 5 percent and a risk of incorrect acceptance of 10 percent are appropriate.

Assume the following results: Sample size = 183 accounts Book value of items in sample = $149 Average audited value of items in sample = $146 Standard deviation of sample = $28 Required:

a. Use the ratio method to calculate:

(1) Projected misstatement:

(2) Estimated total audited value:

b. Use the difference estimation method to calculate:

(1) Projected misstatement:

(2) Estimated total audited value:

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