Problem

The accounting firm of Johnson and Johnson has decided to design a non-statistical sample...

The accounting firm of Johnson and Johnson has decided to design a non-statistical sample to examine the accounts receivable balance of Francisco Fragrances, Inc., at October 31. As of October 31, there were 1,500 accounts receivable accounts with a balance of $5.5 million. The accounts receivable population can be segregated into the following strata:

Jonathan L. Gren, senior-in-charge of the audit, has made the following decisions:

• Based on the results of the tests of controls and risk assessment procedures, a low assessment is made for the risk of material misstatement.

• The desired confidence level is moderate.

• The tolerable misstatement allocated to accounts receivable is $155,000, and the expected misstatement is $55,000.

• All the balances greater than $50,000 will be audited.

Required:

a. Using the nonstatistical sampling formula included in the textbook, compute the suggested sample size for this test.


b. Gren confirmed the accounts receivable accounts selected and noted the following results:

Using ratio projection, what is the total projected misstatement? What conclusion should Gren make concerning the accounts receivable balance?

Step-by-Step Solution

Request Professional Solution

Request Solution!

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.

Request! (Login Required)


All students who have requested the solution will be notified once they are available.
Add your Solution
Textbook Solutions and Answers Search