You are the auditor of Jexel, an auto air-conditioner service and repair company, and you have decided to use the mean-per-unit method to test the existence and gross valuation of recorded accounts receivable. The clients records include 9,800 accounts with a total book value of $1,280,000. You decide to use tolerable misstatement of $142,000, an incorrect acceptance risk of 5 percent, and an incorrect rejection risk of 1.0 percent. Using Excel, you estimated the standard deviation of the population as $22. Use Figure 9-8 to obtain the incorrect acceptance and rejection coefficients.

Required:

a. Determine the sample size.

b. Assume you tested the sample and got the following results: The mean audited value of the accounts sampled was $121. Assuming that the standard deviation of the samples audited value is also $22, what is the projected misstatement for the population?

c. Assuming that the standard deviation of the samples audited value is $17, what is the projected misstatement for the population?