The auditors wish to test the valuation of accounts receivable in the audit of Kaplan Corporation. The client has $990,000 of total recorded receivables, composed of 2,040 accounts. Use Figure 9-13 to determine the reliability factor. The auditors have decided to use structured nonstatistical sampling and have determined the following:

Tolerable misstatement: $48,000

Assessment of inherent and control risk: Moderate

Risk related to other substantive procedures: Moderate

b. Assume that the auditors have tested the sample and discovered the following three misstatements. The remainder of the sample had an average value (book and audited) of $523.00. Use the ratio estimation method to calculate the projected misstatement of the population. (Do not round any division. Round your final answer to the nearest dollar amount.)

Book Value

$100

$108

525

Audited Value

634

885

520

c. Use the results obtained in (b) to come to a conclusion about whether to accept or reject the population.

Accept

Reject