The auditor is auditing accounts receivable for a long-time client that has good internal controls. The auditor

Question:

The auditor is auditing accounts receivable for a long-time client that has good internal controls. The auditor has assessed control risk as low and assigns a control risk assessment of 20 % and a desired audit risk of 5 %. Other factors considered by the auditor:

1. The auditor will not be performing any other substantive audit procedures.

2. Inherent risk, by firm policy, is assessed at 1.00.

3. Client book value is $9,325,000.

4. Tolerable misstatement is assessed at $215,000.

5. Previous audits have shown an expected error of $45,000 over-statement is reasonable.

REQUIRED:

a- Calculate the detection risk

b- Calculate (and show the calculation) of the sample selection interval.

c- Assume the auditor rounds the sampling interval down to the next nearest $5,000. Calculate the approximate largest sample size the auditor would expect.

d- The auditor found the following differences when performing the audit work:

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...