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 client's records include 11,000 accounts with a total book value of $1,300,000. You decide to use tolerable misstatement of $172,000, an incorrect acceptance risk of 15 percent, and an incorrect rejection risk of 10.0 percent. Using Excel, you estimated the standard deviation of the population as $25. UseFigure 9-8to 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 $118. Assuming that the standard deviation of the sample's audited value is also $25, what is the projected misstatement for the population?

c.Assuming that the standard deviation of the sample's audited value is $20, what is the projected misstatement for the population?

FIGURE 9.8 Risk Coefficients Acceptable Incorrect Incorrect Level of Risk Acceptance Coefficient Rejection Coefficient 1.0% 2.33 2.58 4.6 1.68 2.00 5.0 1.64 1.96 10.0 1.28 1.64 15.0 1.04 1.44 20.0 0.84 1.28 25.0 0.67 1.15 30.0 0.52 1.04 40.0 0.25 0.84 50.0 0.00 0.67