Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 17, Problem 29DQP
(a).
To determine
Compute the upper misstatement bound on the basis of the client misstatements in the sample.
(b).
To determine
Identify whether the population acceptable as stated and to find out the options available and which option the auditor should select.
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Upper Limit on Misstatements Calculation: Monetary Unit Sampling. The auditorsmailed positive confirmations on 60 customers’ accounts receivable balances. The company’saccounts receivable balance comprised 2,356 customer accounts with a total recorded balanceof $19,600,000, and the sampling interval was $280,000. The auditors received four positiveconfirmation returns reporting exceptions. Upon follow-up, they found the following:∙ Account 2333. Recorded balance $8,345. The account was overstated by $1,669 becausethe client made an arithmetic mistake recording a credit memo. The company issued only86 credit memos during the year. The auditors examined all of them for the same arithmetic mistake and found no similar misstatements.∙ Account 363. Recorded balance $7,460. The account was overstated by $1,865 because thecompany sold merchandise to a customer with payment due in six months plus 15 percentinterest. The billing clerk made a mistake and recorded the sales price and the…
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.
McMullen and Milligan, CPAs, were conducting the audit of Cusick Machine Tool Company for the year ended December 31. Jim Sigmund, senior-in-charge of th audit, plans to use MUS to audit Cusick's invenotry account. Thee balance at December 31 was $9,000,000.
Required:
A) Based on the following information, compute the required MUS sample size:
Tolerable misstatement = $360,000
Expected misstatement = $90,000
Risk of incorrect acceptance = 5%
B) Nancy Van Pelt, staff accountant, used the sample items selected in part (a) and performed the audit procedures listed in the inventory audit program. She notes the following misstatements:
Misstatement Number Book Value Audit Value
1 $10,000 $7,500
2 $9,000 $6,000
3 $60,000 0…
Chapter 17 Solutions
Auditing And Assurance Services
Ch. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Prob. 3RQCh. 17 - Prob. 4RQCh. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - Prob. 7RQCh. 17 - Prob. 8RQCh. 17 - Prob. 9RQCh. 17 - Prob. 10RQ
Ch. 17 - Prob. 11RQCh. 17 - Prob. 12RQCh. 17 - Prob. 13RQCh. 17 - Prob. 14RQCh. 17 - Prob. 15RQCh. 17 - Prob. 16RQCh. 17 - Prob. 17RQCh. 17 - Prob. 18RQCh. 17 - Prob. 19RQCh. 17 - Prob. 20RQCh. 17 - Prob. 21.1MCQCh. 17 - Prob. 21.2MCQCh. 17 - Prob. 21.3MCQCh. 17 - Prob. 22.1MCQCh. 17 - Prob. 22.2MCQCh. 17 - Prob. 22.3MCQCh. 17 - Prob. 23.1MCQCh. 17 - Prob. 23.2MCQCh. 17 - Prob. 23.3MCQCh. 17 - Prob. 24.1MCQCh. 17 - Prob. 24.2MCQCh. 17 - Prob. 24.3MCQCh. 17 - Prob. 25DQPCh. 17 - Prob. 26DQPCh. 17 - Prob. 27DQPCh. 17 - Prob. 28DQPCh. 17 - Prob. 29DQPCh. 17 - Prob. 30DQPCh. 17 - Prob. 31DQPCh. 17 - Prob. 32DQPCh. 17 - Prob. 34DQPCh. 17 - Prob. 35DQP
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- McMullen and Milligan, CPAs, were conducting the audit of Cusick Machine Tool Company for the year ended December 31. Jim Sigmund, senior-in-charge of th audit, plans to use MUS to audit Cusick's invenotry account. Thee balance at December 31 was $9,000,000. Required: A) Based on the following information, compute the required MUS sample size: Tolerable misstatement = $360,000 Expected misstatement = $90,000 Risk of incorrect acceptance = 5% B) Nancy Van Pelt, staff accountant, used the sample items selected in part (a) and performed the audit procedures listed in the inventory audit program. She notes the following misstatements: Misstatement Number Book Value Audit Value 1 $10,000 $7,500 2 $9,000 $6,000 3 $60,000 0…arrow_forwardAn audit firm is conducting the audit of Diaz Construction Company for the fiscal year ended October 31. Rebecca Smith, the partner in charge of the audit, decides that MUS is the appropriate sampling technique to use in order to audit Diaz’s inventory account. The balance in the inventory at October 31 was $4,250,000. Rebecca has established the following: risk of incorrect acceptance = 5% (i.e., the desired confidence level of 95%), tolerable misstatement = $212,500, and expected misstatement = $63,750. Calculate the sample size and sampling interval using Table 8-5 in the textbook (round your interval answer to the nearest whole number).arrow_forwardA 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).arrow_forward
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