Star Camera is a wholesale distributor of high-end professional photographic and audio-visual equipment. It sell to camera stores and to professional photographers and audio-visual engineers.

Star has many accounts with overdue balances. The company has historically been slow to pressure customers for payment. The current economic situation has made uncollectible receivables a potentially serious problem.

The current gross amounts of accounts receivable is $14,512,047.03

The company established an allowance for uncollectibles more than two years ago. The balance in that account is currently $156,200. The client believes that this is a reasonable estimate.

The engagement partner has determined that the maximum tolerable misstatement is $500,000.

The detection risk is 5%.

The MUS sample will result in examining individual accounts, determining their uncollectible amounts and projecting the results to the entire population.

REQUIRED

Plan, select, evaluate and draw appropriate conclusions, invluding any adjustments.

The worksheets in this workbook are set up so that only the following spreadsheets will require entries

By you in the yellow cells:

MUS- Sample size

INPUTS (Starts selection)

Overstatement evaluation

Conclusions

The Overstatement evaluation spreadsheet will perform the statistical evaluation and will display the results of the audit examination

Your job is to determine an appropriate sample size, and to interpret the results and draw appropriate conclusion.

All calculation are performed within this workbook by the software embedded in it.

MACROS MUST BE ENABLED. Otherwise, the sample selection software will not execute.

DR ALLOWANCE FOR UNCOLLECTIBLE A/E

CR ACCOUNTS RECEIVABALE

That, however, is not the only entry with which you need to be concerned.