Smith and Smith are Certified Public Accountants who are in love with statistical analysis for audit sampling because of its objectivity and precision. They made an estimation of expected population deviation of their client’s accounts receivable to be 2.1% . However, they seem to have a rough idea that the sample is representative of the population and that its deviation approximates that of the population deviation. They decided to set their sample deviation parameters at + 3 or – 3% Required: a. What will be the sample risk deviation tolerable at the lowest limit level for your audit? The total Accounts Receivable is $500,000.00. This is the assertion by management. b. What will be the sample risk deviation that is tolerable at the highest level?
Rate of Change
The relation between two quantities which displays how much greater one quantity is than another is called ratio.
Slope
The change in the vertical distances is known as the rise and the change in the horizontal distances is known as the run. So, the rise divided by run is nothing but a slope value. It is calculated with simple algebraic equations as:
Smith and Smith are Certified Public Accountants who are in love with statistical analysis for audit sampling because of its objectivity and precision. They made an estimation of expected population deviation of their client’s accounts receivable to be 2.1% . However, they seem to have a rough idea that the sample is representative of the population and that its deviation approximates that of the population deviation.
They decided to set their sample deviation parameters at + 3 or – 3%
Required:
a. What will be the sample risk deviation tolerable at the lowest limit level for your audit? The total Accounts Receivable is $500,000.00. This is the assertion by management.
b. What will be the sample risk deviation that is tolerable at the highest level?
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