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The auditors wish to test the valuation of accounts receivable in the audit of Kaplan Corporation....

The auditors wish to test the valuation of accounts receivable in the audit of Kaplan Corporation. The client has $1,050,000 of total recorded receivables, composed of 1,900 accounts. Use Figure 9-13 to determine the reliability factor. The auditors have decided to use structured nonstatistical sampling and have determined the following:

Tolerable misstatement $42,000
Assessment of inherent and control risk Moderate
Risk related to other substantive procedures Moderate

Required:

a. Calculate the required sample size. (Roundup to the next whole number.)

b. Assume that the auditors have tested the sample and discovered the following three misstatements. The remainder of the sample had an average value (book and audited) of $533.00. Use the ratio estimation method to calculate the projected misstatement of the population. (Do not round any division. Round your final answer to the nearest dollar amount.)

Book Value Audited Value
$80 $88
490 583
850 554

c. Use the results obtained in (b) to come to a conclusion about whether to “accept” or “reject” the population.

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ekkarill92 answered 2 years ago
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