Use the replies presented in the following problem for this

Use the replies presented in the following problem for this problem.

a) Use the ratio method to calculate:

(1) Projected Misstatement

(2) Estimated total audited value

b. Use the difference estimation method to calculate:

(1) Projected Misstatement

(2) Estimated total audited value

Rachel Robertson wishes to use mean-per-unit sampling to evaluate the reasonableness of the book value of the accounts receivable of Smith, Inc. Smith has 10,000 accounts receivable accounts with a book value of $1,500,000. Rachel estimastes the population\'s standard deviation to be equal to $25. After examining the over all audit plan, she believes that the test\'s tolerable misstatement is $60,000, and that a risk of incorrect rejection of 5% and a risk of incorrect acceptance of 10% are appropriate.

a. Calculate the required sample size.

b. Assuming the following results:

Average audited value = $146

Standard deviation of sample = 28

Use the mean-per-unit method to:

(1) Calculate the point estimate of the account\'s audited value

(2) Calculate the Projected misstatement for the population

(3) Calculate the adjusted allowance for sampling risk

(4) State Rachel\'s conclusion in this situation

Replies:

Sample Size (a)

1. 14 accounts

2. 112 accounts

3. 183 accounts

4. 263 accounts

Other Replies for (b)

5. $549

6. $30,000

7. $30,201

8. $33,506

9. $34,602

10. $40,000

11. $1,360,423

12. $1,460,000

13. $1,469,799

14. $1,470,000

15.0 $1,530,000

16. $1,530,201

17. Accept population - conclude the risk that it is materially misstated is appropriately low.

18. Reject population - conclude the risk that it is materially misstated is too high.

Solution

sample size

2. 112 accounts

b)

6. $30,000