Q4. Sampling

Maria Zamora is auditing the accounts receivable of Bishop Ltd for the year ended 30th June 2021. Bishops accounts receivable balance was recorded at $5,500,000 and comprised more than 1,500 customer accounts. However, Bishops 10 largest customer balances comprised a high percentage of the recorded accounts receivable (more than $1,000,000 or 30%). As a result, Maria is considering using Dollar Unit Sampling.

Based on prior audits and other judgments, Maria has established the following parameters:

Risk of Incorrect Acceptance. 5%

Tolerable Error $335,000

Expected Error $180,000

Required:

1. Using the appropriate Statistical Sample Sizes Tables in your Textbook, determine the required sample size that would be used by Maria in the audit of Bishop Ltd. Explain how you arrived at this sample size marks will be based on your workings/logic/approach, as well as the sample size specified.

2. Calculate the sampling interval show all workings.

3. In your own words explain the concept of tolerable error in dollar unit sampling this must

be written in your own words.