You are planning the confirmation of accounts receivable. There are 2,000 customer accounts with a total book value of $5,643,200. Tolerable misstatement is set at $175,000, expected misstatement is $40,000, and DR is 30%.

Required

a. What is the sampling interval?

b. What is the maximum sample size?

c. What is the largest value you can use for a random start?

d. Using the following list of the first 15 items in your population, a random start of $25,000, and a rounded sample interval of $100,000, identify the items to be included in your sample.

e. What is the probability of selecting each of the following population items, assuming a $100,000 sampling interval?
Item Book Value Probability of Selection
1........................3,900
2.......................26,000
4.....................130,000
6.....................360,000
f. Why might the final sample size be less than the maximum sample size?

Transcribed Image Text:

Item Book Value Cumulative Amount Sample tem Random Start 3,900 26,000 5,000 130,000 2,000 260,000 1.00 2,000 19,000 10,000 ,000 2,500 65,000 110,000 6,992 10 14 15