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 accep- tance is 30%. The ratio of expected to tolerable misstatement is 20%, and the ratio of tolerable misstatement to the population is 3.5%.
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
|
|
|
4
|
130,000
|
|
|
6
|
360,000
|
|
f. Why might the final sample size include fewer logical units than the computed sample size?