Chapter 17 Homework

17-28 (Objective 17-2)

You are evaluating the results of a nonstatistical sample of 85 accounts

receivable confirmations for the Boherer Company. Information on the sample and population

are included below. An overstatement or understatement of more than 100,000 is considered

material.

a.

Evaluate each of the confirmation exceptions to determine whether they represent

misstatements.

A

The following summarizes the confirmation

responses:

Account

Recorded

Value

Confirmation

Response

Misstatement

147

$24,692

$23,597

$1,095

Pricing error

228

$183,219

$157,216

$26,003

Cutoff error

278

$7,546

$5,546

$0

Timing difference

497

$15,319

$0

$15,319

Cutoff error

564

$8,397

$7,858

$539

Error in quantity

shipped

653

$32,687

$19,328

$13,359

Cutoff error

839

$5,286

$0

$0

Timing difference

Total misstatement

$56,315

b. Estimate the total amount of misstatement in the accounts receivable population. Ignore

sampling risk in the calculation.

B

Estimate of total misstatement

Sample Value

Sample How do you calculate the sample mistatements?

Misstatements

Book Value

Projected

Misstatement How do you calculate the projected misstatement?

Stratum 1

$1,287,643

$26,003

$1,287,643

$26,003

Stratum 2

$1,349,678

$29,773

$4,348,268

$95,920

Stratum 3

$94,637

$539

$947,682

$5,397

Totals

$2,731,958

$56,315

$6,583,593

$127,320