Calculate the projected misstatement for the population

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Reference no: EM131797237

Question: 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: EM131797237

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