Problem 9-47 [LO 9-7]

You are the auditor of Jexel, an auto air-conditioner service and repair company, and you have decided to use the mean-per-unit method to test the existence and gross valuation of recorded accounts receivable. The clients records include 11,100 accounts with a total book value of $1,295,000. You decide to use tolerable misstatement of $202,000, an incorrect acceptance risk of 5 percent, and an incorrect rejection risk of 4.6 percent. Using Excel, you estimated the standard deviation of the population as $24. Use Figure 9-8 to obtain the incorrect acceptance and rejection coefficients.

Required:

a. Determine the sample size.

b. Assume you tested the sample and got the following results: The mean audited value of the accounts sampled was $113. Assuming that the standard deviation of the samples audited value is also $24, what is the projected misstatement for the population?

c. Assuming that the standard deviation of the samples audited value is $19, what is the projected misstatement for the population?