Rachel Robertson wishes to use mean-per-unit sampling to evaluate the reasonableness of the book value of the accounts receivable of Smith, Inc. Smith has 10,000 receivable accounts with a total book value of $1,500,000. Robertson estimates the population's standard deviation to be equal to $25. After examining the overall audit plan, the auditors believe that the account's tolerable misstatement is $60,000, and that a risk of incorrect rejection of 5 percent and a risk of incorrect acceptance of 10 percent are appropriate.

a. Calculate the required sample size.

b. Assuming the following results:

Book value of items in sample = $149

Average audited value of items in sample = $146

Standard deviation of sample = $28 use the mean-per-unit method to:

(1) Calculate the point estimate of the account's audited value.

(2) Calculate the projected misstatement for the population.

(3) Calculate the adjusted allowance for sampling risk.

(4) State the auditors' conclusion in this situation (accept or reject).

Use the following replies for the above questionsreplies may be used once, more than once, or not at all. In all cases, select the reply closest to your answer.

Sample size (a)

1. 14 accounts.

2. 112 accounts

3. 183 accounts

4. 263 accounts

Other replies for (b)

5. $549

6. $30,000

7. $30,201

8. $33,506

9. $34,602

10. $40,000

11. $1,360,423

12. $1,460,000

13. $1,469,799

14. $1,470,000

15. $1,530,000

16. $1,530,201

17. Accept populationconclude the risk that it is materially misstated is appropriately low.

18. Reject populationconclude the risk that it is materially misstated is too high.