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assume you are planning the confirmation of accounts receivable there are 2 000 cust 738429

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 acceptance is 30%. The ratio of expected to tolerable misstatement is 20%, and the ratio of tolerable misstatement to the population is 3.5% (round down to 3% for use in Exhibit 8.7).

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

3

130,000

4

360,000

f. Why might the final sample size include fewer logical units than the computed sample size?

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