Refer to problem 6-23, at the end of Chapter 6, concerning the confirmation of accounts receivable of Pittance Manufacturing Company. You are now considering using dollar unit sampling in the audit of accounts receivable.

Required :

a. Is it acceptable to audit the 50 largest accounts when dollar unit sampling is being used ? How would these 50 items be treated in evaluating the results if they were selected and audited separately?

b. Would the same sample items have been selected if dollar unit sampling had been used ? How would the characteristics of the sample probably differ ?

c. Assume the sample items as shown in the sample error results for problem 6-23 had been obtained using dollar unit sampling. Calculate the statistical results using combined attributes-variables evaluation and dollar unit difference estimation.

d. Explain why your answers in c are different from or similar to the ones obtained in part a of problem 6-23 using difference estimation.

e. Would it be acceptable to follow the practice described in part c of problem 6-23 if combined attributes-variables evaluation or dollar unit difference estimation was used?

Problem 6-23:

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6-23. You are using statistical sampling to confirm accounts receivable of Pittance Manufacturing Company. The population of accounts receivable is as follows: Number of accounts Total recorded book value 8,150 $23,689,423 You review the accounts receivable trial balance and observe that there are several extremely large balances. The sample is designed to include the 50 largest accounts, which total $6,843,902, and a random selection of 160 of the remaining amounts. This sample size is based on the following criteria: Materiality (based on net income) $400,000 Alpha risk 10% Beta risk 10% The sample when audited contains 24 errors, none of which are in the 50 largest accounts. These are detailed as follows: