Reference no: EM132032931
INTERPRETING SAMPLE RESULTS
The following problems are based on the material in the INTERPRETING CONFIDENCE INTERVALS IN AUDIT SAMPLES folder.
Sketch the results on a 1-dimensional graph.
Place your answers below.
1. An auditor has selected and evaluated a statistical sample of accounts receivable to assess collectibility on an account-by-account basis, and then project the finding of uncollectible amounts to the population. Several accounts were found in the examination to be partly or entirely uncollectible.
The test results showed that, at 95% confidence, uncollectible receivables total between 800,000 and 4,200,000 (overstatement).
a. What should be the auditor's conclusion if the maximum tolerable misstatement is $1,800,000?
b. Propose an appropriate adjusting journal entry.
c. Suppose that, prior to this test, the client's allowance for uncollectible accounts is $1,000,000. What would you recommend?
2. You are performing an obsolescence review of a 22,000 item parts inventory. The book value of the inventory is $10,515,000. You decide to select a random sample for dollar value estimation. The maximum tolerable misstatement is $500,000 and the planned confidence level is 95% (2-sided). Pricing errors were disclosed in the sample.
What would be your conclusions/recommendation in each of the following situations?
a. Overstated by an estimated $320,000, with a lower confidence limit [LCL] of $30,000 and an upper confidence limit [UCL] of $610,000.
b. Overstated by an estimated $240,000, with LCL = $90,000 and UCL=$390,000.
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Company capital structure consists of debt
: What percentage of the company's capital structure consists of debt?
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Deposits it receives from commercial banks
: In that case, the Bank of Canada is willing to lend to commercial banks at ________% and is willing to pay ________% on deposits it receives from commercial
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Semiannual coupon payment
: Assume tax rate is 35%. Debt: $10M face value, current price $10.8M, 6.4% coupon rate, 25 years to maturity, semiannual coupon payment.
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Actual unemployment rate
: Frictional unemployment as 3%, cyclical unemployment as 2%, and structural unemployment as 4%. Then we would know that NAIRU is (?) and the actual unemployment
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Propose appropriate adjusting journal entry
: What should be the auditor's conclusion if the maximum tolerable misstatement is $1,800,000? Propose an appropriate adjusting journal entry.
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Measuring gdp for a particular year
: Why are only final goods counted in measuring GDP for a particular year? Why is the value of used furniture that's bought and sold not counted?
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Government give certain firms monopoly power
: If monopolies are bad, why then does the government give certain firms monopoly power?
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What takes place to a firm in monopolistic competition
: What takes place to a firm in monopolistic competition when it increases its price? How is this different from a firm engaged in perfect competition?
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Maximizes profits for the monopolistically competitive
: A monopolistically competitive firm has the following demand and total cost curves: Demand: P = 9-0.25Q; TC = 124-16Q+Q^2.
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