Attachment 4: Workpaper 2 alternate
Charles Cabinets
Revenue Collection cycle
Accounts Receivable
performed by:
date:
John
2/29112
Nature of test:
Test of details
Objective:
The objective ofthis procedure is to determine if the accounts receivable
account are overstated.
Assertion(s):
Existence; Valuation and Allocation
Tolerable error:
For accounts receivable tolerable error has been set at 10% of the account
balance
$237,198.36 ( 10% x $2,371.983.60)
Procedure:
Sample size calculation and evaluation of sample results
Account balance
Tolerable error
Standard deviation
$2,371,983.601 N
237,198.36
806.81
Ho: u > 2,550.52 - 255.05
a = 0.30
Za/2 = 1.04
P = 0.15
Z~ = 1.04
= 930
average = $2,550.52
255.05
tolerable error is 10% of the recorded balance
risk of incorrect rejection
risk of incorrect acceptance
TE
= Z~* SJ...Jn
+
Za/2* Sx/...Jn
255.05 = 1.04*806.811...jn + 1.04*806.811...Jn
...In = 2.08*806.81 1255.05
255.05 = 2.08*806.8\t...Jn
n = 43.29
=> n = 44
4'"
. .s ~II
••
Y,~
\ ,'" 0"
~\ pl'
e
Projection of Sample Results to the population
sample
results
106,724.85
=Zp
1.04
sample
n=
mean
N=
44
,>.425.56/'
2,371,983.60
Book value
2,255,775.24
projected balance
116,208.36
projected overstatement
* SJ'l/n
1,390.09
"44
= 217.95
x 930
202,690.25
318,898.62
allowance for sampling risk
projected error plus allowanc
We are unable to conclude that Accounts Receivable is not materially overstated because the
projected overstatement plus the allowance for sampling risk exceeds the $237,198.36 tolerable
error.
14
Attachment
2: Workpaper
2
performed
date:
Charles Cabinets
Revenue Collection cycle
Accounts Receivable
John
by:
2/29112
Nature of test:
Test of details
Objective:
The objective of this procedure is to determine if the accounts receivable
account are overstated.
Assertion(s):
Existence; Valuation and Allocation
Tolerable error:
For accounts receivable tolerable error has been set at 10% of the account
balance
$237,198.36 ( 10% x $2,371.983.60)
Procedure:
Sample size calculation and evaluation of sample results
Account balance
Tolerable error
Standard deviation
$2 371.983.601 N = 930
237,198.36
806.81
Ho: u > 2,550.52 - 255.05
a = 0.30
ZaJ2 = 1.04
~=0.15
ZB =1.04
average = $2,~50.52
255.05
tolerable error is 10% of the recorded balance
risk of incorrect rejection
risk of incorrect acceptance
y.
TE
= Zp* Sxl,jn
+
ZaJ2* Sxl,jn
255.05 = 1.04*806.811,jn + 1.04*806.811,jn
,jn
= 2.08*806.81 1255.05
255.05 = 2.08*806.811,jn/hJ1
n =43.29
=>h~44
\\0
'r
1-\·1.o.J
Evaluation
of Sample Results
Critical Value = /.l + Zp* Sxl,jn
/sl
~"
, "I>'
,
Iff
~
2,295.47 + i04
* 1,39-0-.0-9
-I,j-4•)•••
2513.42
We are unable to conclude that Accounts Receivable is not materially overstated because the
sample mean of $2,425.56 is less than the $2,513.42 critical value.
12
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.J1
z 1. 451'7
ell
Z '511,liS
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