Reference no: EM132896912
Question - Adam William wishes to use mean-per-unit sampling to evaluate the reasonableness of the book value of the accounts receivable of Ebeco, Inc. Ebeco has l0,000 receivable accounts with a total book value of $1,500,000. Adam estimates the population's standard deviation to be equal to $25. After examining the overall audit plan, the auditors believe that the account'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: book value of items in sample $149; average audited value of items in sample $146; standard deviation of sample $28, use the ratio method to calculate:
1. Projected misstatement.
2. Estimated total audited value.
c. Use the difference estimation method to calculate:
1. Projected misstatement.
2. Estimated total audited value.
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