Calculate the allowance for sampling risk

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Question - An auditor expects no errors in a client's account receivable balance (audit population) but is concerned about potential monetary overstatement and, therefore, elects to use probability-proportional-to-size sampling. Recorded book value is P1,200,000, maximum tolerable overstatement is P80,000, and the risk of incorrect acceptance is preset at 15%.

After sample size is determined and sampling units are selected and examined, the following differences are noted:

Customer number Recorded Value Audited Value

1826 P15,000 P12,000

2041 16,000 15,050

Required -

Calculate sample size.

Calculate the allowance for sampling risk.

Reach a conclusion.

Reference no: EM133154873

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