1. The auditors are using mean-per unit sampling to evaluate the reasonableness of the book value of the accounts receivable of Mojito, Inc. Mojito has 10,000 receivable accounts with a total book value of $1,000,000. The auditors estimate the populations standard deviation as being equal to $20. After examining the overall audit plan, the auditors believe that the accounts tolerable misstatement is $60,000, and that a risk of incorrect rejection of 4.6% and a risk of incorrect acceptance of 5% should be used.

Required: (10 points)

1. Calculate the required sample size.
2. Now, ignore your sample size calculation in part a. and assume that your answer was a sample size of 150 and that you obtained the following results:

Average audited value of items in sample $96

Average book value of items in sample $98

Sample Standard deviation $22

Using mean-per-unit sampling, calculate the projected misstatement for the population.

c. Still using a sample size of 150, using mean-per-unit sampling, calculate the adjusted allowance for sampling risk and use it to form a statistical conclusion concerning the book value of the population ($1,000,000). That is, calculate an interval and either accept or reject the clients book value