Assume you are planning the confirmation of accounts receivable. There are 2,000 customer accounts with a total book value of $5,643,200. Tolerable misstatement is set at $200,000, and expected misstatement is $40,000. The risk of incorrect acceptance is 30%. The ratio of expected to tolerable misstatement is 20%, and the ratio of tolerable misstatement to the population is 3.5% (round down to 3% for use in Exhibit 8.7).
a. What is the sample size?
b. What is the sampling interval?
c. What is the largest value you can use for a random start?
d. Using the following list of the first 15 items in your population, a random start of $25,000, and a rounded sample interval of $100,000, identify the items to be included in your sample.
|
Item |
Book Value |
Cumulative Amount |
Sample Item |
|
Random Start |
|||
|
1 |
3,900 |
||
|
2 |
26,000 |
||
|
3 |
5,000 |
||
|
4 |
130,000 |
||
|
5 |
2,000 |
||
|
6 |
260,000 |
||
|
7 |
100 |
||
|
8 |
25,000 |
||
|
9 |
19,000 |
||
|
10 |
10,000 |
||
|
11 |
9,000 |
||
|
12 |
2,500 |
||
|
13 |
65,000 |
||
|
14 |
110,000 |
||
|
15 |
6,992 |
e. What is the probability of selecting each of the following population items, assuming a $100,000 sampling interval?
|
Item |
Book Value |
Probability of Selection |
|
1 |
3,900 |
|
|
2 |
26,000 |
|
|
3 |
130,000 |
|
|
4 |
360,000 |
f. Why might the final sample size include fewer logical units than the computed sample size?
