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. General inspection level III and a single sampling plan are used. Normal inspection is initiated at the start of the inspection of lot 1. The inspection results for 24 consecutive lots are as follows: 9 10 11 12 20 8 24 20 225 22 22 22 12 21 23 24 Lot 1 2 3 4 5 Nonconforming 24 14 22 17 10 items Lot 13 14 15 Nonconforming 17 88 54 155 16 17 66 7 18 68 18 19 20 21 72 14 18 20 21 18 27 225 12 17 items a) Use the switching rules listed in the lecture notes to determine the sampling plans and the types of inspection used for lots 2, 6, 13, 20, 22 and 24. State whether each one of lots 1-24 should be accepted or rejected. State the type of inspection that will be used for lot 25. b) Draw the OC curve for the single sampling plan that will be used for lot 25.

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. General inspection level III and a single sampling plan are used. Normal inspection is initiated at the start of the inspection of lot 1. The inspection results for 24 consecutive lots are as follows: 9 10 11 12 20 8 24 20 225 22 22 22 12 21 23 24 Lot 1 2 3 4 5 Nonconforming 24 14 22 17 10 items Lot 13 14 15 Nonconforming 17 88 54 155 16 17 66 7 18 68 18 19 20 21 72 14 18 20 21 18 27 225 12 17 items a) Use the switching rules listed in the lecture notes to determine the sampling plans and the types of inspection used for lots 2, 6, 13, 20, 22 and 24. State whether each one of lots 1-24 should be accepted or rejected. State the type of inspection that will be used for lot 25. b) Draw the OC curve for the single sampling plan that will be used for lot 25.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter8: Specialized Audit Tools: Attributes Sampling, Monetary Unit Sampling, And Data Analytics Tools

Section: Chapter Questions

Problem 27RQSC

See similar textbooks

Similar questions

A component of an account balance has a recorded balance of $10,000 and an audited valueof $8,000. By using monetary unit sampling, if the sampling interval is $20,000, the projected misstatement would bea. $2,000.b. $4,000.c. $5,000.d. $10,000.
Assume that an account with a recorded balance of $5,000 has an audited value of $3,000. By using monetary unit sampling, if the sampling interval is $1,500, the projected misstatement would bea. $600.b. $900.c. $2,000.d. $3,000.
Assume the following misstatements were found in a PPS sample. Sample Item Book Value Audit Value $650 $585 540 0 (a) 1. 1 2. 2 3 4 5 1,900 2,200 2,800 0 Calculate the projected misstatement assuming: 1,650 2.660 The sampling interval was $1,800. $ The sampling interval was $2,000. $
Using Appendix B of this book, select a simple random sample of 10 numbers in the range from 1 to 9,876. What is each step in the process?
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 _________________
An external auditor of Roses Corporation sent out positive confirmation requests to 1,000 customers. Population size is 2,400 accounts, with a total recorded value of P400,000. Recorded value of samples selected is P159,960 and audited value of samples is P151,360. What is the estimated population audited value using ratio estimation? A. 400,000 B. 422,728 C. 378,480
For each term in the first column below, identify its definition (or partial definition). Each definition may be used once or not at all. # 1 2 3 4 5 6 7 8 9 Definition (or Partial Definition) A defined rate of departure from prescribed controls. Also referred to as occurrence rate or exception rate. A sampling plan for locating at least 1 deviation, providing that the deviation occurs in the population with a specified frequency. Also referred to as precision, a measure of the difference between a sample estimate (projection) and the tolerable rate of deviation or tolerable misstatement at a specified sampling risk. An estimate of the most likely amount of monetary misstatement in a population. The complement of the risk of incorrect acceptance. The maximum population rate of deviations from a prescribed control that the auditors will accept without modifying the planned assessment of control risk. The possibility that the assessed level of control risk based on the sample is less…
A CPA company is conducting the audit of Finch Hardware Company for the year ended December 31. The senior-in-charge of the audit plans to use MUS to audit Finch’s inventory account. The balance at December 31 was $9,000,000, tolerable misstatement is $360,000, expected misstatement is $90,000, and the risk of incorrect acceptance is 5%. Compute the required MUS sample size and sampling interval using Table 8-5 in the textbook (round your interval answer to the nearest whole number).
Sample Size Determination. Jule Phillips is examining the internal control of CowboyCompany and has identified the mathematical verification of sales invoices as an importantcontrol and decided to test this control. Based on a discussion with Cowboy’s management,Phillips determined that Cowboy Company’s employees were required to indicate their compliance with this control by writing their initials in an appropriate place on the invoice copy.Assume that Phillips established an acceptable risk of overreliance of 5 percent, anexpected population deviation rate of 3 percent, and a tolerable rate of deviation of 9 percent.Required:a. Using AICPA sample size tables, determine the appropriate sample size.b. Indicate how Phillips would assess the three parameters that are used to determine sample size (risk of overreliance, expected population deviation rate, and tolerable rate ofdeviation).c. Use the original parameters but now assume that Phillips is willing to increase the acceptable risk…
Monetary Unit Sampling with IDEA: Determining Sample Size and Selecting Sample Items. 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 $389,638 (or 10% of the recorded balance of the transactions Expected misstatement $58,446 (or 1.5% of the recorded balance of the transactions) Required:a. Use IDEA to determine the necessary sample size, given the above parameters.b. What is the sampling interval? Show how the sampling interval can be arithmeticallydetermined from the sample size and the population size.c. Assuming a random start of 5,678, use IDEA to extract sample items from the population. List the transactions associated with the sample items selected by your audit teamfor examination. (Be sure to use “fixed interval extraction” and “high values in database”as options.)d. Describe how IDEA extracts sample items from the population of sales…
In an MUS sample with a sampling interval of $5,000, an auditor discovered that aselected accounts receivable with a recorded amount of $10,000 had an audit valueof $8,000. If this is the only error discovered by the auditor, the projected error ofthe sample would be(1) $1,000. (3) $4,000.(2) $2,000. (4) $5,000.
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.