You are the auditor of Jexel, an auto air conditioner service and repair company, and you have decided to use the mean-per-unit method to test the existence and gross valuation of recorded accounts receivable. The client%u2019s records include 10,000 accounts with a total book value of $1,250,000. You decide to use tolerable misstatement of $182,000, an incorrect acceptance risk of 5 percent, and an incorrect rejection risk of 4.6 percent. Using generalized audit software, you estimated the standard deviation of the population as $25. Use Figure 9-8 to obtain the incorrect acceptance and rejection coefficients.
A. Determine the sample size.
B. Assume you tested the sample and got the following results: The mean audited value of the 25 accounts was $122. What is the projected misstatement for the population?
C. Assuming that the standard deviation of the sample%u2019s audited value is $20, what is the projected misstatement for the population?