Accounting - Probability/ Sampling
nextbcad_1025Due: 05/11/2015 before 11PM eastern time (US)
Question 1 (Probability Proportionate to size)
You have selected 100 sample items from ABC's accounts receivable population.Forthisproblemonly,assumethetotalpopulationforaccountsreceivableis $500,000.
Now let us assume the following invoices were selected. This is only a partial listofpopulation items. Start with a random starting point of$1,223.
Invoice Number | Recorded Amount |
778 | $125 |
779 | $2,460 |
780 | $670 |
781 | $1,200 |
782 | $2,455 |
783 | $234 |
784 | $9 |
785 | $2,222 |
786 | $675 |
787 | $8,544 |
788 | $32 |
789 | $3,000 |
790 | $11,200 |
Required:
Whichinvoiceswouldyouselect?
Question 2 (Variables Sampling Problem)
You have been charged to perform test of controls over Accounts Receivable. Youhaveselected PPS sampling method because it automatically results in a stratified sample.
You computed the sample size, using the risk of incorrect acceptance, the total recordedamountofreceivablesandthenumberofmisstatedaccountsallowedanddividedthetotalrecordedbookamountofreceivablesbythesample sizeinordertodeterminingasamplinginterval.Youhavecalculatedthesamplesizetobe60andthesamplingintervaltobe$10,000.Giventhis,only50differentaccountswereselectedbecause several of the accounts were so large that the sampling interval caused each ofthemtobeselectedtwice.Giventheresultsyousent55confirmations.Threeoftheselectedaccountsinyoursamplehadbalancesunder$20andso youdecidednottosend them confirmations, and three had negative balances. Instead you substitutedthethree largest accounts that had not been selected in the sample. Each of theseaccounts had a balance greater than $7,000. The results of the confirmationsrevealedtwo differences. One difference showed an audit amount of $3,000 but had beenrecorded at $4,000. Therefore you projected this to be a $1,000 misstatement the otheraccount had an audit is amount of $2,000 but had been recorded at $1,900. You didnotcountthe$100differencebecausethepurposethetestwasto detectoverstatements.
ThereforeyourvaluationstatesthattheAccountsReceivablebalancewasnot overstated because the projected misstatements was less than the allowance for samplingrisk.
Required:
Discussed each incorrect assumption, statement and/are inappropriate applicationofthe sampling procedures that you used.
- 9 years ago
- 20
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