In planning a sample for A/R, you use the following information:
Risk of Incorrect Acceptance |
Population Size |
Tolerable Misstatement |
Expected Misstatement |
Actual Sample Size |
|
* |
5% |
$2,000,000 |
$100,000 |
$10,000 |
75 |
Confirmations were sent out and the following differences were noted:
Customer Number |
Amount per Books |
Amount per Customer |
Reason |
13062 |
$ 36,321 |
$ 18,161 |
Billed twice for the same order. |
13672 |
$ 986 |
$ - |
Customer sent payment on 12/27. Payment was received on 1/4. Fiscal year-end is 12/31. |
13235 |
$ 109 |
$ 82 |
Billed for wrong model. |
13785 |
$ 2,483 |
$ 2,257 |
Failed to give appropriate discount. |
Using the above information, give the following amounts:
Projected misstatement |
|
Upper limit on misstatement |
|
Allowance for sample risk |
Show all your work!!
A)
S.No | Customer Number | Amount as per Books | Amount as per Customer | Mistatemnet |
A | 13062 | $36,321 | $18,161 | $18,161 |
B | 13672 | $986 | $0 | $986 |
C | 13235 | $109 | $82 | $27 |
D | 13785 | $2,483 | $2,257 | $226 |
E | Projected Mistatement | $19,400 |
B)
S.No | Particulars | Amount ($) |
A | Pupulation Size | $2,000,000 |
B | Risk of Incorrect Acceptance | 5% |
C | Upper Limit on Mistatements | $100,000 |
D | Expected Mistatement | $10,000 |
E | Actual Mistatement | $19,400 |
F | Sample size | 75 |
G | Risk of Incorrect Acceptance (Accounts) (B*F) | 4 |
H | Actual Accounts Reeivables got Mistated | 4 |
As the actual misstatements are higher than expected misstatements accounts receivables are materially misstated.
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