Question
17-26 You are evaluating the results of a nonstatistical sample of 85 accounts receivable confirmations for the Bohrer Company. Information on the sample and population
17-26 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
# of Recorded # of Recorded
Stratrum Accounts Value Accounts Value
>$75,000 8 $1,287,643 8 $1,287,463
$10,000-74,999 40 1,349,678 257 4,348,268
<$10,000 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. Recorded Confirmation
No. Value 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.
a. Evaluate each of the confirmation exceptions to determine whether they represent misstatements.
b. Estimate the total amount of misstatement in the accounts receivable population. Ignore sampling risk in the calculation.
c. Is the population acceptable? If not, indicate what follow-up action(s) you consider appropriate in the circumstances.
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