Question
Required information [The following information applies to the questions displayed below] Rachel Robertson wishes to use mean-per-unit sampling to evaluate the reasonableness of the book
Required information
[The following information applies to the questions displayed below]
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 9,200 receivable accounts with a total book value of $1,525,000. Robertson estimates the population's standard deviation to be equal to $20. After examining the overall audit plan, the auditors believe that the account's tolerable misstatement is $51,000, and that a risk of incorrect rejection of 1 percent and a risk of incorrect acceptance of 5 percent are appropriate. Use Figure 9.8.
Assuming the following results:
Book value of items in sample = $158
Average audited value of items in sample = $155
Standard deviation of sample = $25
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:
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