ACC 491 Week 5 Team Study Guide Audit Sampling Case Memo -
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DESCRIPTION FOR THIS STUDY GUIDE:
TUTORIAL: This tutorial includes 12 pages, 1,965 words, and three references in correct APA format. A+++ WORK!
Resources: Ch. 13 of Modern Auditing: Assurance Services and the Integrity of Financial Reporting
Prepare a 1,400- to 1,750-word memo to the Audit Partner, John Smith, summarizing your findings from the following case found in Ch. 13 of Modern Auditing: Comprehensive Question13-27 Key West Company’s —PPS Sampling Problem Audit Findings for Key West Company
13-27(PPS sampling) You decide to use statistical sampling to test the reasonableness of the recorded book value of the Key West Company’s accounts receivable Because the company’s internal control procedures over accounts receivable have been evaluated by you as excellent and you believe few misstatements will be found,you decide to use probability-proportional-to-size sampling. The company has 4,000 customer accounts with a total book value of $3,000,000. You decide $150,000 is the maximum tolerable misstatement and anticipate that there may be $30,000 of misstatement in the population.You wish to limit the risk of incorrect acceptance to 10%. It is your intention to seek positive confirmation of accounts included in your sample and to apply alternative procedures to accounts for which no reply is received.
Required
Compute the sample size.
Compute the sampling interval.
Assume the following misstatements were found in the sample:
Sample Item Book Value Audit Value
1
$800
$0
2
1,500
1,350
3
13,000
0
4
15,000
14,250
Calculate
Projected misstatement.
Allowance for sampling risk.
Upper misstatement limit.
State your conclusion based on the results in (c).
Instantly Download! Get Better Grades in Less Time!
100% Satisfaction Guarantee
DESCRIPTION FOR THIS STUDY GUIDE:
TUTORIAL: This tutorial includes 12 pages, 1,965 words, and three references in correct APA format. A+++ WORK!
Resources: Ch. 13 of Modern Auditing: Assurance Services and the Integrity of Financial Reporting
Prepare a 1,400- to 1,750-word memo to the Audit Partner, John Smith, summarizing your findings from the following case found in Ch. 13 of Modern Auditing: Comprehensive Question13-27 Key West Company’s —PPS Sampling Problem Audit Findings for Key West Company
13-27(PPS sampling) You decide to use statistical sampling to test the reasonableness of the recorded book value of the Key West Company’s accounts receivable Because the company’s internal control procedures over accounts receivable have been evaluated by you as excellent and you believe few misstatements will be found,you decide to use probability-proportional-to-size sampling. The company has 4,000 customer accounts with a total book value of $3,000,000. You decide $150,000 is the maximum tolerable misstatement and anticipate that there may be $30,000 of misstatement in the population.You wish to limit the risk of incorrect acceptance to 10%. It is your intention to seek positive confirmation of accounts included in your sample and to apply alternative procedures to accounts for which no reply is received.
Required
Compute the sample size.
Compute the sampling interval.
Assume the following misstatements were found in the sample:
Sample Item Book Value Audit Value
1
$800
$0
2
1,500
1,350
3
13,000
0
4
15,000
14,250
Calculate
Projected misstatement.
Allowance for sampling risk.
Upper misstatement limit.
State your conclusion based on the results in (c).