Calculate the projected misstatement for the population

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Reference no: EM131487519

Rachel Robertson wishes to use mean-per-unit sampling to evaluate the reasonablness of the book value of the accounts receivable of Smith, Inc. SMith has $10,000 receivable accounts with a total book value of $1,500,000. Robertson estimates the population's standard deviation to be equal to $25. After examining the overall audit plan, the auditors believe that the accounts tolerable misstatement is $60,000, and that a risk of incorrect rejection of 5 percent and a risk of incorrect acceptance of 10 percent are appropriate.

Required: A. Calculate the required sample size.

B. Assuming the following results:

Book value of item sample= $149

Average audtied value of item in sample= $146

Standard deviation of sample = $28

Use the mean-per-unit method to:

Calculate the point estimate of the accounts audited value

Calculate the projected misstatement for the population

Calculate the adjusted allowance for smapling risk

State the auditors conclusion in this situation (accept or reject)

Reference no: EM131487519

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