You have just completed the accounts receivable confirmation process in the audit of Danforth Paper Company, a paper supplier to retail shops and commercial users. Following are the data related to this process:
Accounts receivable recorded balance | $ 2,760,000 |
Number of accounts | 7,320 |
A nonstatistical sample was taken as follows: | |
All accounts over $10,000 (23 accounts) | $ 465,000 |
77 accounts under $10,000 | $ 81,500 |
Tolerable misstatement for the confirmation test | $ 100,000 |
Inherent and control risk are both high | |
No relevant analytical procedures were performed |
The following are the results of the confirmation procedures:
Recorded Value | Audited Value | |
Items over $10,000 | $ 465,000 | $ 432,000 |
Items under $10,000 | 81,500 | 77,150 |
Recorded Value | Audited Value | |
Individual misstatements for items under $10,000: | ||
Item 12 | 5,120 | 4,820 |
Item 19 | 485 | 385 |
Item 33 | 1,250 | 250 |
Item 35 | 3,975 | 3,875 |
Item 51 | 1,850 | 1,825 |
Item 59 | 4,200 | 3,780 |
Item 74 | 2,405 | 0 |
Required
a. Evaluate the results of the nonstatistical sample. Consider both the direct implications of the misstatements found and the effect of using a sample.
b. Assume that the sample was a PPS sample. Evaluate the results using monetary unit sampling.
c. (Instructor’s option) Do the preceding analyses using an electronic spreadsheet.
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.