Question

The auditors are using mean-per-unit sampling to evaluate the reasonableness of the book value of the...

The auditors are using mean-per-unit sampling to evaluate the reasonableness of the book value of the accounts receivable of Smith, Inc. Smith has 10,000 receivable accounts with a total book value of $800,000. The auditors estimate the population's standard deviation as being equal to $25. After examining the overall audit plan, the auditors believe that the account's tolerable misstatement is $40,000, and that a risk of incorrect rejection of .10 (risk coefficient = 1.64) and a risk of incorrect acceptance of .15 (risk coefficient = 1.04) should be used. Calculate the required sample size. (10 points)

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You are planning to use monetary unit sampling to evaluate accounts receivable for Violet Company. The...
You are planning to use monetary unit sampling to evaluate accounts receivable for Violet Company. The accounts receivable account totals $3,000,000. You have assessed a risk of incorrect acceptance of 5 percent, a tolerable misstatement of $120,000, and an expected misstatement of $24,000. a. Calculate the sample size and sampling interval. b. Regardless of your answer to (a), use a sample size of 125 and the related sampling interval and calculate the upper limit on misstatements assuming you found the...
You are planning to use monetary unit sampling to evaluate accounts receivable for Purple Company. The...
You are planning to use monetary unit sampling to evaluate accounts receivable for Purple Company. The accounts receivable account totals $4,000,000. You have assessed a risk of incorrect acceptance of 5 percent, a tolerable misstatement of $140,000, and an expected misstatement of $25,200. a. Calculate the sample size and sampling interval. b. Regardless of your answer to (a), use a sample size of 125 and the related sampling interval and calculate the upper limit on misstatements assuming you found the...
Auditing/Accounting Question 9-51 Problem The auditors wish to test the valuation of accounts receivable in the...
Auditing/Accounting Question 9-51 Problem The auditors wish to test the valuation of accounts receivable in the audit of Kaplan Corporation. The client has $1,000,000 of total recorded receivables, composed of 2,000 accounts. The auditors have decided to use nonstatistical sampling and determined the following: Tolerable misstatement                                                                50,000 Assessment of inherent and control risk                                 Moderate Risk related to other substantive procedures                       Moderate So my question is according to the formula: ( Population book value x Reliability factor / Tolerable misstatement) =...
Upper Limit on Misstatements Calculation: Monetary Unit Sampling. Jordan Thomas is using MUS to examine a...
Upper Limit on Misstatements Calculation: Monetary Unit Sampling. Jordan Thomas is using MUS to examine a client’s accounts receivable balance. Using a risk of incorrect acceptance of 5%, a tolerable misstatement of $65,000, a sample size of 100 items and a sampling interval of $12,300, Thomas identified the following misstatements: Item Recorded Balance Audited Value 1 $15,000 $12,500 2 10,000 4,000 3   3,000 2,000 Questions: 1) What is the projected misstatement? 2) What is the basic allowance for sampling risk?...
Upper Limit on Misstatements Calculation: Monetary Unit Sampling. Jordan Thomas is using MUS to examine a...
Upper Limit on Misstatements Calculation: Monetary Unit Sampling. Jordan Thomas is using MUS to examine a client’s accounts receivable balance. Using a risk of incorrect acceptance of 5%, a tolerable misstatement of $65,000, a sample size of 100 items and a sampling interval of $12,300, Thomas identified the following misstatements: Item Recorded Balance Audited Value 1 $15,000 $12,500 2 10,000 4,000 3   3,000 2,000 Questions: 1) What is the projected misstatement? 2) What is the basic allowance for sampling risk?...
AP10.7 (LO 8)  PPS sampling Edwards has decided to use probability-proportional-to-size (PPS) sampling in the audit of...
AP10.7 (LO 8)  PPS sampling Edwards has decided to use probability-proportional-to-size (PPS) sampling in the audit of a client's accounts receivable balance. Few, if any, errors of overstatement are expected. Edwards plans to use the following PPS sampling table: 5% RELIABILITY FACTORS FOR OVERSTATEMENTS Number of Overstatements    Risk of Incorrect Acceptance 1%    5%    10%    15%    20% 0  4.61    3.00    2.31    1.90    1.61 1  6.64 4.75 3.89 3.38 3.00 2  8.41 6.30 5.33...
Below are descriptions of how key parameters are determined in a monetary unit sampling application. Indicate,...
Below are descriptions of how key parameters are determined in a monetary unit sampling application. Indicate, using the correct letter, which parameter is most closely associated with the description. Each parameter is associated with only one description. A) Tainting percentage. B) Sample size. C) Actual misstatement. D) Population size. E) Expected misstatement. F) Tolerable misstatement. Estimated based on prior audits or a pilot sample of current balances.    Determined based on the recorded amount of the account balance or class...
Assume that you are preparing to confirm accounts receivable at December 31, 2022, which is one...
Assume that you are preparing to confirm accounts receivable at December 31, 2022, which is one month prior to the fiscal year-end of January 31, 2023. The book value of gross accounts receivable is $71,622,804. Complete the following requirements related to the confirmation of receivables for Cloud 9 based on previous work and the following information. Required Using PPS sampling, determine the sample size that you want to use for sending accounts receivable confirmations. Draw on the information you learned...
Below are descriptions of how key parameters are determined in a monetary unit sampling application. Indicate,...
Below are descriptions of how key parameters are determined in a monetary unit sampling application. Indicate, using the correct letter, which parameter is most closely associated with the description. Each parameter is associated with only one description. A) Tainting percentage. B) Sample size. C) Actual misstatement. D) Population size. E) Expected misstatement. F) Tolerable misstatement. 1. Estimated based on prior audits or a pilot sample of current balances. ?2. Determined based on the recorded amount of the account balance or...
1. The accounts receivable of Smith Company have a total book value of $120,000. An auditor...
1. The accounts receivable of Smith Company have a total book value of $120,000. An auditor has selected an audit sample of accounts with a total book value of $1,000 and an audited value of $1,200. Extrapolating this deviation over the entire population would result in an estimated total audited value of: a. $144,000 b. $140,000 c. $120,000 d. $100,000 2. Which of the following is only applicable to a public company audit report? a. A public company report is...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT