Question

Wholesale Plumbing Supply

Assume that you have selected the following nonstatistical sample for selecting accounts receivable for confirmation. The total book value of the population is $9,000,000, and tolerable misstatement is $350,000. You have decided to audit every item over $50,000 and randomly select items in two groups under $50,000, as the following shows. You selected the following sample.

Stratum		N		n		Book Value of Stratum			Book Value of Sample			Audit Value of Sample
> $50,000		20		20		$3,000,000			$3,000,000			$2,948,000
$50,000 > x > $5,000		100		30		3,000,000			1,000,000			970,000
< $5,000		300		30		3,000,000			300,000			280,250
						$9,000,000			$4,300,000			$4,198,250

Evaluate results judgmentally: Determine the estimated audited value of the population using nonstatistical ratio analysis.

Estimated audited value of the population

$

Answer 1

				A	B	C	D=C/B	E=D*A	F=A-E
		N	n	Book Value	Book Value	Audit Value	RATIO	Projected	Actual/Projected
				of Stratutm	of Sample	of Sample	(Sample Audit/Sample Book)	Audit Value	Mis Statement
	>$50,000	20	20	$3,000,000	$3,000,000	$2,948,000	0.982666667	$2,948,000	$52,000
	$50000<x<$5000	100	30	$3,000,000	$1,000,000	$970,000	0.97	$2,910,000	$90,000
	<$5000	300	30	$3,000,000	$300,000	$280,250	0.934166667	$2,802,500	$197,500
				$9,000,000	$4,300,000	$4,198,250		$8,660,500	$339,500
	Total Projected Misstatement	$339,500
	Tolerable Misstatement	$350,000
	ESTIMATED AUDITED VALUE OF POPULATION	$8,660,500