Sample Size Determination: Monetary Unit Sampling. The recorded accounts receivable balance for...

Question

Sample Size Determination: Monetary Unit Sampling. The recorded accounts receivable balance for Warner Company was $500,000.

Required:

For each of the following independent sets of conditions, determine the appropriate sample size for the examination of Warner’s accounts receivable in MUS. Based on the differences in your calculations, identify the general relationship between different factors and sample size. (RIA = risk of incorrect acceptance, TM = tolerable misstatement, EM = expected misstatement).

a. RIA = 5 percent, TM = $50,000, EM = $10,000.

b. RIA = 5 percent, TM = $50,000, EM = $25,000.

c. RIA =10 percent, TM = $50,000, EM = $10,000.

d. RIA = 10 percent, TM = $50,000, EM = $25,000.

David · Accepted Answer

Solution-
Ratio (Expected to tolerable misstatement) = Expected Misstatement /Tolerable Misstatement
Scenarios (a) and (c) = $10,000/$50,000 
Scenarios (a) and (c) = 0.20
Scenarios (b) and (d) = $25,000/$50,000  
Scenarios (b) and (d) = 0.50
Tolerable misstatement (percentage of population)   = Tolerable Misstatement /Population
Tolerable misstatement (percentage of population) (For all scenarios) = $50,000/$500,

Sample Size Determination: Monetary Unit Sampling. The recorded accounts receivable balance for Warner Company was $500,000. Required: For each of the following independent sets of conditions,...

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