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)