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#1.Nonstatistical sampling: An auditor has randomly and audited a sample of 100 of Willard Incs accounts receivable. Willard has 3,000 accounts receivable accounts with a

#1.Nonstatistical sampling: An auditor has randomly and audited a sample of 100 of Willard Incs accounts receivable. Willard has 3,000 accounts receivable accounts with a total book value of $3,000,000. The auditor has determined that the accounts tolerable misstatement is $250,000. The sample results are as follows:

Average audited value $990

Average book value 998

Calculate the accounts receivable estimated audited value and projected misstatement using the:

a) Mean-per-unit method.

b) Ratio method.

c) Difference method.

#2 PPS sampling: The auditors wish to test the valuation of accounts receivable in the audit of Dannon Company. The client has $500,000 of total recorded receivables, composed of 850 accounts. The auditors have determined the following:

Tolerable misstatement $25,000

Risk of incorrect acceptance 5%

Expected misstatement$ 2,000

The auditors have decided to use PPS sampling (monetary unit sampling).

a. For planning the sample, calculate:

(1) Required sample size.

(2) Sampling interval.

b. Assume that the auditors have tested the sample and discovered three misstatements:

Book Value Audited Value

$ 50 $ 47

800 760

8,500 8,100

Calculate:

(1) Projected misstatement.

(2) Basic precision.

(3) Incremental allowance.

(4) Upper limit on misstatement.

c. Comment on the quantitative and qualitative implications of b).

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