Question
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 10,200
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 10,200 receivable accounts with a total book value of $1,555,000. Robertson estimates the population's standard deviation to be equal to $28. After examining the overall audit plan, the auditors believe that the account's tolerable misstatement is $62,000, and that a risk of incorrect rejection of 5 percent and a risk of incorrect acceptance of 10 percent are appropriate. Use Figure 9.8.
Simulation 9-43 [LO 9-8]
Assuming the following results:
Book value of items in sample = $151
Average audited value of items in sample = $145
Standard deviation of sample = $30
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.)
1. Project misstatement ______
2. Estimated total audited value ____________
b. Use the difference estimation method to calculate:
1. Project misstatement ______
2. Estimated total audited value ________
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