Response to the following problem:
In auditing the valuation of inventory, the auditor, Claire Butler, decided to use difference estimation. She decided to select an unrestricted random sample of 80 inventory items from a population of 1,840 that had a book value of $175,820. Butler decided in advance that she was willing to accept a maximum misstatement in the population of $6,000 at an ARIA of 5 percent. There were eight misstatements in the sample, which were as follows:
|
Audit Value
|
Book Value
|
Sample Misstatements
|
|
$ 812.50
|
$ 740.50
|
$(72.00)
|
|
12.50
|
78.20
|
65.70
|
|
10.00
|
51.10
|
41.10
|
|
25.40
|
61.50
|
36.10
|
|
600.10
|
651.90
|
51.80
|
|
.12
|
0
|
(.12)
|
|
51.06
|
81.06
|
30.00
|
|
83.11
|
104.22
|
21.11
|
|
$ 1, 594.79
|
$1,768.48
|
$173.69
|
Required:
a. Calculate the point estimate, the computed precision interval, the confidence interval, and the confidence limits for the population. Label each calculation. Use a computer for this purpose (instructor's option).
b. Should Butler accept the book value of the population? Explain.
c. What options are available to her at this point?