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 9,300 receivable accounts with a total book value of $1,530,000. Robertson estimates the population's standard deviation to be equal to $23. After examining the overall audit plan, the auditors believe that the account's tolerable misstatement is $69,000, and that a risk of incorrect rejection of 10 percent and a risk of incorrect acceptance of 15 percent are appropriate. Use Figure 9.8.

Simulation 9-42 [LO 9-7]

Required:

a. Calculate the required sample size.

Assuming the following results:

Book value of items in sample = $159

Average audited value of items in sample = $155

Standard deviation of sample = $28

b. Use the mean-per-unit method to: (Do not round any division. Round other computations and the final answers to the nearest whole value.)

(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).

2.

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 9,300 receivable accounts with a total book value of $1,530,000. Robertson estimates the population's standard deviation to be equal to $23. After examining the overall audit plan, the auditors believe that the account's tolerable misstatement is $69,000, and that a risk of incorrect rejection of 10 percent and a risk of incorrect acceptance of 15 percent are appropriate. Use Figure 9.8.

Simulation 9-43 [LO 9-8]

Assuming the following results:

Book value of items in sample = $159

Average audited value of items in sample = $155

Standard deviation of sample = $28

Required:

a. Use the ratio method to calculate: (The solution from 9-42 is required in order to complete 9-43.) (Do not round intermediate calculations. Round your answers to the nearest whole dollar.)

b. Use the difference estimation method to calculate: