VARIABLE SAMPLING PLAN: PROBABILITY-PROPORTIONAL-TO-SIZE SAMPLING

An auditor expects no errors in a client's account receivable balance (audit population) but is concerned about potential monetary overstatement and, therefore, elects to use probability-proportional-to-size sampling.Recorded book value is P1,200,000, maximum tolerable overstatement is P80,000, and the risk of incorrect acceptance is preset at 15%.

After sample size is determined and sampling units are selected and examined, the following differences are noted:

Customer numberRecorded ValueAudited Value

1826P15,000P12,000

204116,00015,050

Required:

• Calculate sample size.
• Calculate the allowance for sampling risk.
• Reach a conclusion.