7/25/2019 8e_Ch10_Mini_case_Test_of_Details.xls

http://slidepdf.com/reader/full/8ech10minicasetestofdetailsxls 1/2

EarthWear Hands-on Mini-caseChapter 10 - Accounts Receivable Tests of Details© The McGraw-Hill Companies !nc" #01#

INSTRUCTIONS:

1

$iel%s &ou are to complete on wor' papers are colore% &ellow" The color will %isappear when the fiel% is complete%"

!n this mini-case &ou will complete the test of %etails on accounts receivable for the #01# au%it of(arth)ear Clothiers !nc" The principal test of %etail involves sen%in* +confirmations+ or letters tocustomers so that the& can confirm that the& owe (arth)ear the reporte% balance" All si, customeraccounts receivable balances e,cee%in* 100000 were tar*ete% for testin*" These si, balancesa**re*ate% total of .#1000 were confirme% without e,ceptions" The remainin* accounts are ofsimilar si/e an% total ##000 an% will be teste% via au%it samplin*" !nputs for the sample si/e%etermination were Desire% Confi%ence evel--.23 Tolerable Misstatement--400000 an% (,pecte%

Misstatement--125550" 6ase% on these inputs 47 accounts receivable balances were selecte% forconfirmation re8uests" The first 45 accounts receivable confirmations have alrea%& been reviewe% b&other staff members an% no errors have been foun%" The remainin* four confirmations re8uire &ourreview as the& were returne% with notes from customers in%icatin* a potential misstatement" 9leasenote that le*itimate timin* %ifferences %o not result in misstatements"

Review the four confirmation responses in the 9D$ file %ownloa%e% from the mini-case website :a lin'is also provi%e% below;" (nter the information into )or' 9aper 10-1" $or each confirmation responseplease %etermine whether the %ifference note% b& the customer represents a misstatement or a timin*%ifference" After reviewin* all four confirmations please complete both the nonstatistical an% thestatistical evaluation options outline% on )or' 9aper 10-1 unless &our instructor tells &ou otherwise"

Chapter . of the te,t provi%es *ui%ance on both nonstatistical an% statistical evaluation" <ou will nee%to obtain the =amplin* !nterval before evaluatin* the results statisticall& usin* AC" >ne approach &oucan use to obtain the samplin* interval is to calculate the sample si/e in AC usin* the inputs provi%e%above" 9lease refer to Chapter . for a %escription of how to calculate a sample si/e an% evaluate errorsusin* AC" 9lease be careful as &ou enter &our results from AC to the wor' paper as the items ma&not be liste% in the same or%er"

7/25/2019 8e_Ch10_Mini_case_Test_of_Details.xls

http://slidepdf.com/reader/full/8ech10minicasetestofdetailsxls 2/2

Name:

Class:

EARTHWEAR COTHIERS  10-1

E!a"#ation o$ A%R Con$ir&ations Initial Here

'ece&(er 31) 2*12 1@14@#014

Res#"ts o$ A%R Con$ir&ations

C#sto&er I' C#sto&er Na&e

+,2-,431* Red Star Hea"th ro#. 1#42 Enter Amount Indicate reason(s) for difference here. Enter value o

21*-3/02, M#se#& o$ "iht 15#2 Enter Amount Indicate reason(s) for difference here. Enter value o

2,4-+241/ S#&&it Hi" "s Co#ntr C"#( #54# Enter Amount Indicate reason(s) for difference here. Enter value o

10-2+343 Centra" States Hote"s 1745# Enter Amount Indicate reason(s) for difference here. Enter value o+4 additiona" ite&s

770240 770240 0 0Tota" 'o""ar A&o#nt o$ Ite&s in Sa&."e 5,*)1+4 Net &isstate&ent 5*

Tota" 'o""ar A&o#nt o$ Ite&s in Sa&."in 6o.#"ation 50)022)***

Nonstatistica" E!a"#ation o$ Errors

Evaluation of Test Results

0 Enter Evaluation "ere

Statistica" E!a"#ation o$ Errors #sin AC Monetar Unit Sa&."in777

Item Error Most Likely Error Upper Error Limit Evaluation of Test Results

6asic 9recision - - - Input AC# $esult Enter Evaluation "ere1

#

5

Tota"s *8** *8***** To evaluate the results with AL! you will nee to o#tain the $amplin% Interval& 'ne metho you (an use is to (al(ulate the $ample $ie in AL usin% the inputs in the instru(tions&

E!a"#ation Method Co&.arison

In this space please %riefly discuss how the results compare to each other. Are the monetary amounts and overall conclusions similar&

Complete the wor'sheet below b& reviewin* the accounts receivable confirmation file containe% in the !nstructions" Complete the cells below in &ellow" !f &ou %etermine that the %ifferencenote% b& the customer is a misstatement recor% the amount of %ifference in the +Amount of Misstatement+ column"

A%R 9a"ance .erc"ients records

A%R 9a"ance.er C#sto&er

'i$$erence .erC#sto&er

Reason;s< $or 'i$$erence ;i8e8) ti&in di$$erence)trans.osition error) c#t-o$$ error) &ista=e) etc8<

A&o#nt o$Misstate&ent

 Amount ofMisstatement 

Ratio of Misstatements in $ample

ro+e(teMisstatement 

Enter $atio or'ormula

Enter Amountor 'ormula

B The ratio of misstatements is simply the (omputation of the per(enta%e error in ollars teste in the sample& ,ou (an fin this formula an an illustration of the (omp utation in hapter - ./onstatisti(al $amplin% se(tion)&BB ro+e(te misstatement is the appli(ation of the misstatement ratio to the population su#+e(t to auit samplin%& ,ou (an fin this formula an an illustration of the (omputation in hapter - ./onstatisti(al $amplin% se(tion)