Assume that you are preparing to confirm accounts receivable at December 31, 2022, which is one...

Assume that you are preparing to confirm accounts receivable at December 31, 2022, which is one month prior to the fiscal year-end of January 31, 2023. The book value of gross accounts receivable is $71,622,804. Complete the following requirements related to the confirmation of receivables for Cloud 9 based on previous work and the following information. Required Using PPS sampling, determine the sample size that you want to use for sending accounts receivable confirmations. Draw on the information you learned about PPS sampling in Chapter 10. The book value of accounts receivable before the allowance for doubtful accounts is $71,622,804. You make the following assumptions: You set tolerable misstatement for accounts receivable at $3,500,000. Expected misstatement = $750,000. Risk of incorrect acceptance = 37%. Given these parameters: What do you believe to be appropriate qualitative assumptions for inherent risk and control risk given the risk of incorrect acceptance used?

Expert Solution

Given in question
Account Balance	$71,622,804
Tolerable Misstatement for account	$3,500,000
Expected Misstatement	$750,000
Risk of incorrect acceptance	37%

To find Sampling interval
*Materiality - ( Expected Misstatement Error Expansion Factor) / Reliability Factor**

From PPS samping table,
Error Expanision factor = 1.06
Reliability Factor = 1.15
Materiality / Tolerable Mistatement = $3500000

Sampling Interval -	$3500000 - ($750000 *1.06)/1.15
	$2,352,173.91


To Find Sample Size
Account Balance / Sampling Size
$ 71622804 / $ 2352173.91
30.44
.
Sample Size =~ 30

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ekkarill92 answered 2 years ago

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