The auditors wish to test the valuation of accounts receivable in the audit of Desert Enterprises of Bullhead City. The client has $500,000 of total recorded receivables, composed of 850 accounts. The auditors have determined the following:
Tolerable misstatement	$25,000
Risk of incorrect acceptance	5%
Expected misstatement	$2,000
a. For planning the sample, calculate:
(1)Required sample size.
(2)Sampling interval.
b. Assume that the auditors have tested the sample and discovered three misstatements:
Book Value	Audited Value
$ 50	$ 47
800	760
8,500	8,100
(1)Projected misstatement.
(2)Basic precision.
(3)Incremental allowance.
(4)Upper limit on misstatement.
c. Explain how the auditors would consider the results calculated in requirement (b).