You are auditing Martinez Inc.'s accounts receivable balance using classical variables sampling. Martinez's accounts receivable comprised 2,500 customer accounts and were recorded at $3,500,000.

Using a risk of incorrect acceptance and a risk of incorrect rejection of 5 percent, you selected a sample of 200 accounts for examination and confirmed the accounts with the customers. The total recorded balance of these 200 accounts was $1,000,000; based on your confirmations as well as an investigation of differences reported by customers, you determined an audited balance of $900,000. Tolerable misstatement was established at $175,000.

Required:

1. What is the sample estimate of Martinez's accounts receivable balance using mean-per-unit, difference and ratio estimation methods? Comment on why you get different estimates with the different methods. What changes would you recommend in this circumstance?
2. In what circumstances should each of the different methods of classical variables estimation be used?