Table A: General Information Zebulon Corp. Accounts Receivable audit. NOTE: all the information that you might need from figure 9.14 and figure 9.15 in the textbook have been provided in the table below. Round your sample size number tothe next nearest whole number.For all other calculations round your result to 3 decimal places.

The A/R total book value (population) (P)

$5,250,000.00

Tolerable Misstatement(TM)

$750,000.00

Expected misstatement in the population (EM)

75,000.00

Error Expansion Factor (EEF) at 15% risk of Incorrect Acceptance (EEF)

Reliability Factor: (RF) is at the risk of incorrect acceptance at 15%

Formula Section:

Sample Interval (SI) or (I) = {TM - (EM x EEF)}/RF

Sample size (n) = Pop/I,or n = (Pop x RF)/(TM - (EM x EEF))

Basic Precision = RF x SI

UML = Basic Precision + Projected Misstatements + Incremental allowance for sampling risk

Part2B

Ques. 1.

1a. Calculate the Sampling Interval (SI) and Insert your answer here:________________________

You must show your calculations here to receive full credit )

1b. Calculate the sample size (n). Assume zero misstatements found and Insert your answer here: __

Show your calculations here to receive full credit:

1c. The auditor selected the following accounts to perform the confirmation of accounts receivable procedures.Complete Column C, D, E, and F in Table B

Table B

A

Book Value

B

Audited Value

C

Misstatement or tainting amount

A-B

D

Tainting Factor % (C/A)

E

Sampling Interval

F = E*D¹

Projected Misstatement

(top stratum)

$750,000

$500,000

lower stratum

$300,000

$150,000

Total

-

Answer the following using the Table B that you completed

1.What is the Misstatements or the tainting amount from Colum C________________

2.What is the correct tainting factor from Column D for the two bottom strata . _______

Show your calculation here to receive full credit

3.Complete Colum E by putting the Sample Interval you calculated earlier.

4.Determine theBasic Precision(RF x SI) insert your answer here _______________

Show your calculation here to receive full credit:

5.Using the information on the table you completed above to calculate and indicate yourProjected Misstatement here:_________________

Show the calculation of Projected Misstatement here to receive full credit

Top stratum: _____________________________________________________:

+

Bottom stratum: __________________________________________________:

= Total Projected Misstatement ___________________________________________:

Par 2. 2. Use the information from Table A and your previous calculations to answer the questions below

1. What is the incremental allowance for sampling errors: Insert answer here:________

(Use the rows that apply in the worksheet below to determine your incremental allowance)

A

Error

Rank

B

Reliability

Factor

C

Increment

D= (C-1)

Increment-1

E

Projected[1]Misstatements

F

Incremental Allowance F=(DxE)

0

1.90

-

-

-

-

1

3.38

2

4.72

3

6.02

Incremental Allowance for Sampling Risk

2. What is the UML (the upper misstatement limit)? Insert your answer here: _________

Description of item

Insert Amount

1.

Basic Precision

2.

Projected Misstatements

3.

Incremental Allowance

4

UML

Note: UML is the total of items 1-3

3. Is the Accounts Receivable Balance materially misstated (2.5pts)?

4. Why do you conclude the way you did?

Part 2. C (15 points):Essays questionsInstructions: Auditors are required to consider a client's internal control when conducting an audit

a. Describe three reasons why auditors consider a client's internal control when performing the audit 1. 1.

2.

3.

b. Even the best internal control has certain limitations. Identify and explain two of those limitations.

1.

2.

c. An audit client's population of accounts payable is $1,350,000. After testing a sample from this account, the auditor did not find any misstatements. As a result, the auditor concluded that the account payable is not materially misstated.Does this mean that Accounts payable does not contain any misstatement? Explain

1.

d.Who cares about sampling?Why don't we just select a bunch of invoices to test from the pile and test those?

[1]YOU MAY ASSUME THAT PROJECTED MISSTATEMENT IS SAME AS MULTIPLYING TAINTING FACTOR % BY SAMPLING INTERVAL.