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Q4. Sampling Terri Sampson is auditing the accounts receivable of Bikkely Ltd for the year ended 30th June 2020. Bikkely's accounts receivable balance was recorded
Q4. Sampling Terri Sampson is auditing the accounts receivable of Bikkely Ltd for the year ended 30th June 2020. Bikkely's accounts receivable balance was recorded at $8,500,000 and comprised more than 2,000 customer accounts. However Bikkely's 10 largest customer balances comprised a high percentage of the recoded accounts receivable (more than $1,500,000 or 30%). As a result, Terri is considering using Dollar Unit Sampling. Based on prior audits and other judgments, Terri has established the following parameters: Risk of Incorrect Acceptance 10% Tolerable Error $335,000 Expected Error $180,000 Required a. Determine the required sample size that would be used by Terri in the audit of Bikkely 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. b. Calculate the sampling interval - show all workings. c. In your own words explain the concept of tolerable error in dollar unit sampling - this must be written in your own words. [6+2 +2 = 10 Marks)
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