Compute Sample Size 4 Use the AICPA sampling formula to select a sample size for testing accounts receivable based on the information below. The company has two major customers that will be tested as a separate stratum. 3 Part a. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Part b. 19 Book value of accounts receivable Tolerable misstatement Individually material accounts (2) Confidence factor (moderate risk) 6,000,000 100,000 1,600,000 2 Calculate sample size (exclude 2 individually material accounts) Effect of TODB factors 20 Change in Factor Potentially Affected Factor Change 21 22 Increase in control risk for sales Sample size for confirmations Increase Expected direct projection of error 23 Increase in TODB sample size 25 Part c. 26 27 Project Error Assume a sample of 100 was selected and allocated as follows: Stratum 1 2 3 Account Description > $50,000 $10,000 - $49,999 $100,000 Number of Misstatements Actual $ Mstmts Projected Mstmt Resolution Sample Size 65 66 Proj. + ASR Nature of Misstatement 67 1 54 1 20,000 20,000 104,200 Improper contract price applied Adjust for actual misstatements Request client fix population 2 54 8 3 46 3 68 69 70 71 20,400 425 4,000 400 110,568 4,731 12,077 7,333 241,468 Cutoff errors; pricing and quantity errors 106,979 Pricing and quantity errors 114,007 Incorrect foreign currency translation 95,333 Incorrect product shipped 4 33 1 5 72 1 Compute Sample Size 4 Use the AICPA sampling formula to select a sample size for testing accounts receivable based on the information below. The company has two major customers that will be tested as a separate stratum. 3 Part a. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Part b. 19 Book value of accounts receivable Tolerable misstatement Individually material accounts (2) Confidence factor (moderate risk) 6,000,000 100,000 1,600,000 2 Calculate sample size (exclude 2 individually material accounts) Effect of TODB factors 20 Change in Factor Potentially Affected Factor Change 21 22 Increase in control risk for sales Sample size for confirmations Increase Expected direct projection of error 23 Increase in TODB sample size 25 Part c. 26 27 Project Error Assume a sample of 100 was selected and allocated as follows: Stratum 1 2 3 Account Description > $50,000 $10,000 - $49,999 $100,000 Number of Misstatements Actual $ Mstmts Projected Mstmt Resolution Sample Size 65 66 Proj. + ASR Nature of Misstatement 67 1 54 1 20,000 20,000 104,200 Improper contract price applied Adjust for actual misstatements Request client fix population 2 54 8 3 46 3 68 69 70 71 20,400 425 4,000 400 110,568 4,731 12,077 7,333 241,468 Cutoff errors; pricing and quantity errors 106,979 Pricing and quantity errors 114,007 Incorrect foreign currency translation 95,333 Incorrect product shipped 4 33 1 5 72 1