Fill the spaces with answers
Part a. Compute Sample Size Use the AICPA sampling formula to select a sample size for testing accounts receivable based on the information below. The company has two major customers that will be tested as a separate stratum. Book value of accounts receivable Tolerable misstatement Individually material accounts (2) Confidence factor (moderate risk) 6,000,000 100,000 1,600,000 Calculate sample size (exclude 2 individually material accounts) 88 The sample size has already been computed to demonstrate the calculation Part b. Effect of TODB factors Change in Factor Change Potentially Affected Factor Sample size for confirmations Decrease in control risk for sales Enter the effect of the change in the highlighted cells Sample size for confirmations Decrease in tolerable missatement Expected direct projection of error Increase in TODB sample size Activate Win Part c. Project Error Assume a sample of 100 was selected and allocated as follows: Stratum 1 2 3 Account Description >$50,000 $10,000 - $49,999 $100,000 Number of Misstatements Actual $ Mstmts Projected Mstmt Resolution Sample Size Proj. + ASR Nature of Misstatement 1 54 1 20,000 20,000 104,200 Improper contract price applied Adjust for actual misstatements Request client fix population 2 54 8 1 3 33 20,400 4,000 400 425 110,568 12,077 7,333 4,731 241,468 Cutoff errors; pricing and quantity errors 114,007 Incorrect foreign currency translation 95,333 Incorrect product shipped 106,979 Pricing and quantity errors 4 72 1 5 46 3 Indicate the action you will take for items 3-5 Yes Increase Decrease No Effect No Probably not Accept population Adjust for actual misstatements Expand sample size Request client fix population Treat error as isolated anomaly Part a. Compute Sample Size Use the AICPA sampling formula to select a sample size for testing accounts receivable based on the information below. The company has two major customers that will be tested as a separate stratum. Book value of accounts receivable Tolerable misstatement Individually material accounts (2) Confidence factor (moderate risk) 6,000,000 100,000 1,600,000 Calculate sample size (exclude 2 individually material accounts) 88 The sample size has already been computed to demonstrate the calculation Part b. Effect of TODB factors Change in Factor Change Potentially Affected Factor Sample size for confirmations Decrease in control risk for sales Enter the effect of the change in the highlighted cells Sample size for confirmations Decrease in tolerable missatement Expected direct projection of error Increase in TODB sample size Activate Win Part c. Project Error Assume a sample of 100 was selected and allocated as follows: Stratum 1 2 3 Account Description >$50,000 $10,000 - $49,999 $100,000 Number of Misstatements Actual $ Mstmts Projected Mstmt Resolution Sample Size Proj. + ASR Nature of Misstatement 1 54 1 20,000 20,000 104,200 Improper contract price applied Adjust for actual misstatements Request client fix population 2 54 8 1 3 33 20,400 4,000 400 425 110,568 12,077 7,333 4,731 241,468 Cutoff errors; pricing and quantity errors 114,007 Incorrect foreign currency translation 95,333 Incorrect product shipped 106,979 Pricing and quantity errors 4 72 1 5 46 3 Indicate the action you will take for items 3-5 Yes Increase Decrease No Effect No Probably not Accept population Adjust for actual misstatements Expand sample size Request client fix population Treat error as isolated anomaly
