You are evaluating the results of a nonstatistical sample of 85 accounts receivable confirmations for the Bohrer Company. Information on the sample and population are included below. Tolerable misstatement for accounts receivable confirmation sampling is $100,000.
Sample Population
Stratum
# of
Accounts
Recorded
Value
# of
Accounts
Recorded
Value
1 > $75,000 8 $1,287,643 8 $1,287,643
2 +10,000 – +74,999 40 1,349,678 257 4,348,268
3 < $10,000 25 94,637 712 947,682
73 $2,731,958 977 $6,583,593
The confirmation responses were received without exception, other than the following
items:
Acct.
No.
Recorded
Value
Confirmation
Response Auditor Follow-Up
147 $ 24,692 $ 22,486 Customer was charged the wrong price.
228 183,219 157,216 $26,003 shipment recorded on December 30; goods were not shipped until January 3.
278 7,546 5,546 Customer sent $2,000 payment on December 29; received on January 2.
497 15,319 0 $17,443 shipment made on December 30; goods were received by the customer on January 2.
Required
Chapter 17 / AUDIT SAMPLING FOR TESTS OF DETAILS OF BALANCES 609
Acct.
No.
Recorded
Value
Confirmation
Response Auditor Follow-Up
564 8,397 7,858 Customer received less than the full quantity
ordered.
653 32,687 19,328 $13,359 shipment recorded on December 30;
goods were not shipped until January 2.
830 5,286 0 $5,286 shipment recorded on December 30;
goods were not shipped until January 3.
Sample
Size Interval
Number of
Misstatements
Dollar Amount
of Actual
Misstatements
Projected
Misstatement
Upper
Bound
Nature of
Misstatements
1. 54 36,450 1 20,000 20,000 104,200 Improper contract
price applied
2. 46 43,290 3 425 4,731 106,979 Various pricing and
quantity errors
3. 54 36,450 8 20,400 110,568 241,468 Incorrect
shipments, cutoff
errors, and pricing
errors
4. 33 60,385 1 4,000 12,077 114,007 Incorrect currency
translation on
foreign shipment
5. 72 27,500 1 400 7,333 95,333 Incorrect product
shipped
6. 44 44,845 2 2,500 29,897 112,934 Duplicate shipment,
incorrect price
a. Evaluate each of the confirmation exceptions to determine whether they represent
misstatements.
b. Estimate the total amount of misstatement in the accounts receivable population.
Ignore sampling risk in the calculation.
c. Is the population acceptable? If not, indicate what follow-up action(s) you consider
appropriate in the circumstances.
