You have been asked to perform substantive testing of the receivables account for Ocie's Manufacturing. You have been instructed to utilize sampling techniques. There are 3,000 customer accounts making up the balance. Of those 3,000 total accounts, 30 of them are for amounts over $20 million. Assume that you stratified the population and performed tests on the 30 large balances. You selected a sample of 30 from the remaining 2,970 balances, and found overstatements totaling $2 million.
Required:
(a) What is the known error of the portion of the account you sampled?
(b) Is there the possibility for any more misstatements? If so, how much?
(c) What might you discuss with Ocie's management about your findings?