Question
The auditors wish to test the valuation of accounts receivable in the audit of Kaplan Corporation. The client has $1,000,000 of total recorded receivables, composed
The auditors wish to test the valuation of accounts receivable in the audit of Kaplan Corporation. The client has $1,000,000 of total recorded receivables, composed of 2,000 accounts. The auditors have decided to use structured nonstatistical sampling and have determined the following:
Tolerable misstatement | $50,000 |
Assessment of inherent and control risk | Moderate |
Risk related to other substantive procedures | Moderate |
Required:
Calculate the required sample size.
Assume that the auditors have tested the sample and discovered three misstatements:
Book Value | Audited Value |
---|---|
$100 | $ 90 |
512 | 600 |
900 | 520 |
The remainder of the sample had an average value (book and audited) of $501.00. Use the ratio estimation method to calculate the projected misstatement of the population.
Use the results obtained in (b) to come to a conclusion about whether to accept or reject the population
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