Auditing & Assurance Services 6th Edition by Timothy Louwers

Exercise 295

Sample Size Determination: Classical Variables Sampling. The recorded inventory balance for Faulk Company was $1,000,000 and comprised 2,500 customer accounts.
Required:
For each of the following independent sets of conditions, determine the appropriate sample size for the audit of Faulk's inventory using classical variables sampling (mean-per-unit estimation). Based on the differences in your calculations, identify the general relationship between different factors and sample size. (RIA = risk of incorrect acceptance, RIR = risk of incorrect rejection, TM = tolerable misstatement, EM = expected misstatement, SD = standard deviation.)
a. RIA = 5 percent, RIR = 5 percent, TM = $50,000, EM = $20,000, SD = $40.
b. RIA = 10 percent, RIR = 5 percent, TM = $50,000, EM = $20,000, SD = $40.
c. RIA = 10 percent, RIR = 10 percent, TM = $50,000, EM = $20,000, SD = $40.
d. RIA = 5 percent, RIR = 5 percent, TM = $30,000, EM = $20,000, SD = $40.
e. RIA = 5 percent, RIR = 5 percent, TM = $50,000, EM = $10,000, SD = $40.
f. RIA = 5 percent, RIR = 5 percent, TM = $50,000, EM = $10,000, SD = $30.