Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 17, Problem 22.2MCQ
To determine
Indicate the projected error of sample.
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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.
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.
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.
Chapter 17 Solutions
Auditing And Assurance Services
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- An auditor is using PPS Sampling to determine the projected error in Accounts Receivable. Two errors were discovered: Error #1: Book Value of $400, Audit Value of $100 Error #2: Book Value of $6,000, Audit Value of $2,000 The Sampling Interval was $2,000 Total Projected Error is: a. $2,100 b. $2,833 c. $4,300 d. $2,300 e. $5,500arrow_forwardd. Assume that based on additional controls implemented by ELM, your audit team has decided to reduce the expected misstatement from $77,928 to $19,482 (0.5 percent of the recorded balance of the transactions). What is the necessary sample size, holding all other factors constant?arrow_forwardThe accounting department of the client reports that the balance of Accounts Receivable is $210,000. Using classical variable sampling, the auditor computes an estimated total population value of $216,500 and computed a 95% achieved allowance for sampling risk of +- $8,500. The auditor should conclude that the accounts receivable balance is fairly stated. on Select one: O a. False Ob. True Iarrow_forward
- If the UML or Projected Misstatement in a sampling is $8,000, while the tolerable misstatement is $9,000, what would an auditor likely conclude? A) Since the UML or Projected Misstatement is less than the tolerable misstatement, the account is not materially misstated. B) Since the UML or Projected Misstatement is less than the tolerable misstatement, the account is misstated. C) The analysis has been improperly performed since the UML or Projected Misstatement is unequal to the tolerable misstatementarrow_forwardAssume 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. $arrow_forwardUpper Limit on Misstatements Calculation: Monetary Unit Sampling. Jordan Thomas is using MUS to examine a client’s accounts receivable balance. Using a sample size of 100 items and a sampling interval of $12,300, Thomas identified the following misstatements: Item Recorded Balance Audited Value 1 $15,000 $12,500 2 10,000 4,000 3 3,000 2,000 Required:a. Calculate the upper limit on misstatements assuming a risk of incorrect acceptance of (1) 5 percent and (2) 10 percent.b. Based on your calculations in part (a), comment on the relationship between the risk of incorrect acceptance and the upper limit on misstatements.arrow_forward
- 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?arrow_forward. The true proportion of accounts receivable with some kind of error is 8 percent for Moby Group. If an auditor randomly samples 100 accounts receivable, a) is it acceptable to use the normal approximation to estimate the probability that fewer than two will contain errors? Explain your reasoning. b) what is the mean and standard deviation of errors? c) assume the auditor takes a sample of 150, what is the probability that less than 5 will contain errors?arrow_forwardCalculate the UML using Table 9-3 assuming that the following three misstatements were discovered in testing based on the MUS sample computed in part (b).Do not round intermediate calculations. Round your answer to the nearest dollar amount. Misstatement Number Book Value Audit Value 1 $ 400 $ 320 2 500 0 3 3,000 2,500arrow_forward
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