17-26 (Objective 17-2) You are evaluating the results of a nonstatistical sample of 85 accounts receivable confirmations for the Bohrer Company. Information on the sample and population are included below. Tolerable misstatement for accounts receivable confirmation sampling is $100,000.

		Sample			Population
Stratum		# of Accounts	Recorded Value	# of Accounts	Recorded Value
1	>$75,000	8	$1,287,643	8	$1,287,643
2	$10,000$74,999	40	1,349,678	257	4,348,268
3		25	94,637	712	947,682
		73	$2,731,958	977	$6,583,593

The confirmation responses were received without exception, other than the following items:

Acct. No.	Recorded Value	Confirmation Response	Auditor Follow-Up
147	$ 24,692	$ 22,486	Customer was charged the wrong price.
228	183,219	157,216	$26,003 shipment recorded on December 30; goods were not shipped until January 3.
278	7,546	5,546	Customer sent $2,000 payment on December 29; received on January 2.
497	15,319	0	$17,443 shipment made on December 30; goods were received by the customer on January 2.
564	8,397	7,858	Customer received less than the full quantity ordered.
653	32,687	19,328	$13,359 shipment recorded on December 30; goods were not shipped until January 2.
830	5,286	0	$5,286 shipment recorded on December 30; goods were not shipped until January 3.

1. Evaluate each of the confirmation exceptions to determine whether they represent misstatements.

2. Estimate the total amount of misstatement in the accounts receivable population. Ignore sampling risk in the calculation.

3. Is the population acceptable? If not, indicate what follow-up action(s) you consider appropriate in the circumstances.

For all exceptions, the auditor is concerned with four issues: 1 Whether there is a client error or is the exception the result of a timing error; 2 The amount of the client error, if any; 3 The cause of the exception; 4 Potential misstatements in the untested population. Tolerable misstatement for this test is $100,000. Nonstatistical test. Audit Step 1 2 For each of the 7 confirmation exceptions listed in 17-26, determine which of the exceptions represent misstatements. The accounts receivable population was stratified prior to sample selection. Accordingly, any exceptions noted must be associated with and aggregated by stratum based on recorded value. Estimate the total amount of misstatement in the accounts receivable population without regard to sampling risk. Conclude on the acceptability of the accounts receivable balance. 3 4 Acct # Recorded Value Confirmation Value Misstatement Amt Stratum (1,2 or 3) 147 228 278 497 564 653 830 Stratum Sample Value Sample Misstatements Stratum Value Projected Misstatement 1 2 3 Totals Conclusion