You are designing a PPS 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.You estimate the maximum misstatement to be $40,000 and tolerable misstatement is set at $175,000.

Required

a. Complete the following table using the audit risk model

b. What is the effect on sample size (increase or decrease) of:
1. Increasing the audit risk
2. Increasing the TD risk
3. Increasing the tolerable misstatement
4. Increasing the expectedmisstatement

Transcribed Image Text:

(AR = IR × CR × OSPR × TD): Risks (%) Sampling Interval Sample Size Case AR IR CR OSPR TD 100 100 100 50 50 100 100 50 50 50 2 10 5 4 50 20