Items are submitted for inspection in lots of size 12000 using ANSI/ASQC Z1.4 (a.k.a.MIL-STD-105-E). The acceptable quality level is 2.5% nonconforming. Generalinspection level III and a single sampling plan are used. Normal inspection is initiated atthe start of the inspection of lot 1. The inspection results for 24 consecutive lots are asfollows:910 1112 20 8242022522 2222122123 24Lot12345Nonconforming 2414221710itemsLot1314 15Nonconforming 1788541551617667186818 19 20 217214 18 20 21182722512 17itemsa) Use the switching rules listed in the lecture notes to determine the sampling plansand the types of inspection used for lots 2, 6, 13, 20, 22 and 24. State whethereach one of lots 1-24 should be accepted or rejected. State the type of inspectionthat will be used for lot 25.b) Draw the OC curve for the single sampling plan that will be used for lot 25.

Part (a): Determine Sampling Plans, Inspection Types, and Lot Acceptance/RejectionGiven Data:Lot…

Answered: Items are submitted for inspection in…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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An audit firm is conducting the audit of Diaz Construction Company for the fiscal year ended October 31. Rebecca Smith, the partner in charge of the audit, decides that MUS is the appropriate sampling technique to use in order to audit Diaz’s inventory account. The balance in the inventory at October 31 was $4,250,000. Rebecca has established the following: risk of incorrect acceptance = 5% (i.e., the desired confidence level of 95%), tolerable misstatement = $212,500, and expected misstatement = $63,750. Calculate the sample size and sampling interval using Table 8-5 in the textbook (round your interval answer to the nearest whole number).
How do I write the formula to compute which proposal to select? The sample answer is given next to it. I need to write an “IF” statement and be able to drag that “IF” statement down to the other cells and for it to be correct.
Calculate total projected mistreatment if the following three mistreatments were discovered in a PPS sample when the sampling interval is $1,000. Recorded Amount Audit Amount Sampling interval Total Projected Mistreatment 1st mistreatment $400 $320 $1,000 _________________ 2nd mistreatment 500 0 $1,000 _________________ 3rd mistreatment 3,000 2,500 $1,000 _________________
Monetary Unit Sampling with IDEA: Determining Sample Size. Assume that your audit team has established the following parameters for the examination of ELM’s sales transactions: Risk of incorrect acceptance 10% Tolerable misstatement $311,711 (or 8% of the recorded balance of the transactions) Expected misstatement $77,928 (or 2% of the recorded balance of the transactions) Required:a. Use IDEA to determine the necessary sample size, given the above parameters.Parts (b), (c), and (d) are independent scenarios that affect the sample size in this example.b. Assume that your audit team has decided to increase their reliance on internal controland permit a corresponding increase in the risk of incorrect acceptance from 10 percentto 15 percent, which maintains overall audit risk at the same level. What is the necessarysample size, holding all other factors constant?c. Assume that your audit team has decided to reduce the level of tolerable misstatementfrom $311,711 to $233,783 (or…
The following are auditor judgments and attributes sampling results for six populations. Assume large population sizes. 1 2 3 4 5 6 EPER (in percent) 2 0.5 1 0 2 5 TER (in percent) 6 4 20 3 8 10 ARO (in percent) 10 5 10 5 5 10 Actual sample size 100 100 20 100 60 60 Actual number of exceptions in the sample 2 3 1 1 1 5 For each population, did the auditor select a smaller sample size than is indicated by using the attributes sampling tables in Table 15-8(p. 519) for determining sample size? What are the implications of selecting either a larger or smaller sample size than those determined using the tables? Calculate the SER and CUER for each population. For which of the six populations should the sample results be considered unacceptable? What options are available to the auditor? Why is analysis of the exceptions necessary even when the populations are considered acceptable? For…
Sample Size and Sampling Interval Determination: Monetary Unit Sampling. Reagan Simmons is conducting the audit of Ace Inc., and is using MUS to select a sampleof inventory items for examination. The recorded balance in Ace’s inventory account was$1,200,000. In carrying out the sampling plan, Simmons established a risk of incorrectacceptance of 5 percent, a tolerable misstatement of $100,000, and an expected misstatement of $20,000.Required:a. What parameters would Simmons consider in determining the sample size for Ace’sinventory?b. How would Simmons identify or establish each of these parameters?c. Determine the necessary sample size for the audit of Ace’s inventory.d. Based on the sample size determined in part (c), determine the appropriate samplinginterval.e. Briefly describe how Simmons would select the sample from a computerized inventorylist that Ace maintains.
Upper Limit on Misstatements Calculation: Monetary Unit Sampling. Carson Allister is performing an MUS application in the audit of Bird Company’s accounts receivable. Based on the acceptable level of the risk of incorrect acceptance of 5 percent and a tolerable misstatement of $120,000, Allister has calculated a sample size of 75 items and a sampling interval of$25,000. After examining the sample items, the following misstatements were identified: Item Recorded Balance Audited Value 1 $35,000 $28,000 2 10,000 8,000 3 6,000 3,000 Required:a. Calculate the upper limit on misstatements for Bird Company’s accounts receivable.b. Provide a brief description of the meaning of the upper limit on misstatements calculatedin part (a).c. What would Allister’s conclusion be with respect to the fairness of Bird’s accountsreceivable balance?
37. A pie chart meets the ACCURATE criteria for good quality information because visualising the components of a data set in a pie chart is User-targeted Authoritative Timely Relevance 38. A consultant has made two statements about sampling: An entire set of data from which a sample can be selected for analysis a called a distribution Statistical methods can be applied to a representative sample in both exploratory and confirmatory data analysis Are these statement accurate? Only state 1 is accurate Only state 2 is accurate Both state are accurate Neither state is accurate
Sample Size Relationships: Monetary Unit Sampling. For each of the following cases, provide the missing information. Recorded balance $1,500,000 $190,000 (C) Sample size 115 (B) 124 Sampling interval (A) $4,222 $18,000

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