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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) = sample size

How do you determine the reliability factor?

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