An auditor is going to choose a sample of accounts receivable balances at year end to test and has determined the appropriate sampling interval to be 4 with a random start of the second balance in the list. Presented below are the first 10 accounts in the list (in order). Determine the first 2 account balances (including the random start) that will be sampled and tested using the sampling interval. Beads Galore $678 Beads N Such $5,125 Island Time Beads $235 Premier Beads $4,020 Regal Beads $567 Seattle Bead Xchange $321 Shipwreck Beads $3,502 The Bead Place $870 The Bead Place Too $450 The Bead Place Too Phoenix $125

An auditor is going to choose a sample of accounts receivable balances at year end to test and has determined the appropriate sampling interval to be 4 with a random start of the second balance in the list. Presented below are the first 10 accounts in the list (in order). Determine the first 2 account balances (including the random start) that will be sampled and tested using the sampling interval. Beads Galore $678 Beads N Such $5,125 Island Time Beads $235 Premier Beads $4,020 Regal Beads $567 Seattle Bead Xchange $321 Shipwreck Beads $3,502 The Bead Place $870 The Bead Place Too $450 The Bead Place Too Phoenix $125

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter8: Specialized Audit Tools: Attributes Sampling, Monetary Unit Sampling, And Data Analytics Tools

Section: Chapter Questions

Problem 27RQSC

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The accounting department of the client reports that the balance of Accounts Receivable is $210,000. Using classical variable sampling, the auditor computes an estimated total population value of $216,500 and computed a 95% achieved allowance for sampling risk of +- $8,500. The auditor should conclude that the accounts receivable balance is fairly stated. on Select one: O a. False Ob. True I
Upper Limit on Misstatements Calculation: Monetary Unit Sampling. Jordan Thomas is using MUS to examine a client’s accounts receivable balance. Using a sample size of 100 items and a sampling interval of $12,300, Thomas identified the following misstatements: Item Recorded Balance Audited Value 1 $15,000 $12,500 2 10,000 4,000 3 3,000 2,000 Required:a. Calculate the upper limit on misstatements assuming a risk of incorrect acceptance of (1) 5 percent and (2) 10 percent.b. Based on your calculations in part (a), comment on the relationship between the risk of incorrect acceptance and the upper limit on misstatements.
Sample Selection. Read each of the following cases. Explain for each case how you couldselect a sample having the best chance of being representative of the population using(1) unrestricted random selection and (2) systematic random selection. a. You need to select a sample of recorded cash disbursements. The client used two bankaccounts for general disbursements. Account 1 was used during January–August andissued checks numbered 3633–6632. Account 2 was used during May–December andissued checks numbered 0001–6000.b. You need to select a sample of purchase orders. The client issued prenumbered purchaseorders in the sequence 9000–13999. You realize that if you select five-digit random numbersfrom a table and look for numbers in this sequence, 95 percent of the random numbersyou scan will be discards because a table has 100,000 different five-digit randomnumbers. (The computer is down today!) How can you alter this sequence to reduce thenumber of instances in which the numbers in the…
An auditor is reviewing transactions in an expense account. The dollar amounts are 118, 140, 133, 167, 171, 158, and 145. Construct a 90% confidence interval for the average transaction amount.
3. A bank in Ottawa is considering a survey of its customers for the purpose of estimating the mean number of checks written per customer in each month. A sample of 360 customers was selected. The following sample values were recorded: = = 33.4 and s = 11.2. (a) Provide a 90% confidence interval estimate for the mean number of checks written per customer in each month and interpret the estimate. 1 (b) Suppose a mistake was made in counting the number of customers that was surveyed, and the actual sample size was 36 instead of 360. Recompute the 90% confidence interval estimate, and compare it to the estimate developed in part (a). Why are the estimates different even though the sample mean and standard deviation did not change? (c) The bank is interested in opening another branch in Ottawa. Its demographic studies indicate that the branch will attract about 2000 customers who will have checking accounts. The bank is attempting to prepare a system that would process the checks these…
An auditor is using PPS Sampling to determine the projected error in Accounts Receivable. Two errors were discovered: Error #1: Book Value of $400, Audit Value of $100 Error #2: Book Value of $6,000, Audit Value of $2,000 The Sampling Interval was $2,000 Total Projected Error is: a. $2,100 b. $2,833 c. $4,300 d. $2,300 e. $5,500
In an MUS sample with a sampling interval of $5,000, an auditor discovered that aselected accounts receivable with a recorded amount of $10,000 had an audit valueof $8,000. If this is the only error discovered by the auditor, the projected error ofthe sample would be(1) $1,000. (3) $4,000.(2) $2,000. (4) $5,000.
The 1,000 accounts receivable of Baker Company have a total book value of $60,000 (average book value $60), Wendy Duffo, Certified Public Accountant (CPA). has selected and audited a sample of 50 accounts with the following mean values: 1 Book value of $58.00 2. Audited value of $59.00. What is the estimated total audited value using mean-per-unit classical variables sampling? Multiple Choice $61,034 $59,000 $61,000 $58,000
Sample Size and Sampling Interval Determination: Monetary Unit Sampling. BlytheDrake is conducting an audit of Newman and is using MUS to select a sample of customer accounts receivable for confirmation. Newman’s accounts receivable are recorded at$10,000,000 and comprise 2,000 customer accounts. Drake has established the followingparameters for the investigation:∙ Risk of incorrect acceptance = 5%.∙ Tolerable misstatement = $250,000.∙ Expected misstatement = $50,000.Required:a. Determine the sample size and sampling interval that Drake used in the audit of Newman’s accounts receivable.b. Based on the calculations in part (a), briefly describe how Drake would select customeraccounts from the population of accounts receivable balances for confirmation.c. Holding all other factors constant, determine the sample size and sampling intervalassuming each of the following independent changes in Drake’s sampling parameters:1. Because of improvements in Newman’s internal control policies…
Sample Size Determination: Monetary Unit Sampling. The recorded accounts receivable balance for Warner Company was $500,000.Required:For each of the following independent sets of conditions, determine the appropriate samplesize for the examination of Warner’s accounts receivable in MUS. Based on the differencesin your calculations, identify the general relationship between different factors and samplesize. (RIA = risk of incorrect acceptance, TM = tolerable misstatement, EM = expectedmisstatement).a. RIA = 5%, TM = $50,000, EM = $10,000.b. RIA = 5%, TM = $50,000, EM = $25,000.c. RIA = 10%, TM = $50,000, EM = $10,000.d. RIA = 10%, TM = $50,000, EM = $25,000.
You are auditing accounts receivable for a small company and have found the following results: Number and Size of Client Accounts Book Value of Stratum Book Value of Sample Audit Value of Sample 1,202 accounts < $1,000 $ 1,000,000 $ 75,000 $ 60,000 532 accounts > $1,000 $ 777,504 $ 36,400 $ 34,400 Use ratio projection to project your results. Show your final results. and label appropriately.
Comprehensive Problem: Monetary Unit Sampling. Zachary Mayo is a new staff accountant participating in his first audit engagement. He has been assigned to the Foley Companyengagement and is examining Foley’s accounts receivable. Foley maintains a computerizedledger of its accounts receivable balances, which are recorded at $5,000,000 and comprise5,560 individual customer accounts.Mayo established the following parameters for use in this year’s audit. In so doing, herelied extensively on parameters established in prior audits:∙ Expected misstatement is established at $100,000, which is the average amount of misstatement identified in the past five audits. During the past year, Foley has experienced agreat deal of turnover among its sales processing personnel and has made some relativelylarge sales that present some unusual revenue recognition issues. In addition, accountsreceivable have increased by almost 15 percent from the prior year.∙ The tolerable misstatement is 10 percent of the…

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		Beads Galore $678
		Beads N Such $5,125
		Island Time Beads $235
		Premier Beads $4,020
		Regal Beads $567
		Seattle Bead Xchange $321
		Shipwreck Beads $3,502
		The Bead Place $870
		The Bead Place Too $450
		The Bead Place Too Phoenix $125