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 10,500 accounts with a total book value of $1,310,000. You decide to use tolerable misstatement of $187,000, an incorrect acceptance risk of 10 percent, and an incorrect rejection risk of 5.0 percent. Using Excel, you estimated the standard deviation of the population as $20. 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 $120. Assuming that the standard deviation of the samples audited value is also $20, what is the projected misstatement for the population?

c. Assuming that the standard deviation of the samples audited value is $15, what is the projected misstatement for the population?

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