The auditor is designing a MUS sample to determine how many accounts receivable confirmations to send. There are 2,000 customer accounts with a total book value of $5,643,200. The estimate of likely misstatement is estimated to be $40,000 and tolerable misstatement is set at $175,000.

Required

a. Complete the following table using the audit risk model:

(AR = IR × CR × DR)

b. What is the effect on sample size (increase or decrease) of:
(i) Increasing the audit risk?
(ii) Increasing the detection risk?
(iii) Increasing the tolerable misstatement?
(iv) Increasing the expected misstatement?

Transcribed Image Text:

Sampling Sample IntervalSize Case AR IR CRDR 5 10 5 5 100 100 100 50 50 50 50 25 20 10 2 4