Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 9, Problem 23RQ
To determine
Calculate the estimated total audited value of the account.
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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.
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.
Chapter 9 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 9 - Prob. 1RQCh. 9 - Prob. 2RQCh. 9 - Prob. 3RQCh. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - Prob. 6RQCh. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - Prob. 9RQCh. 9 - Prob. 10RQ
Ch. 9 - Prob. 11RQCh. 9 - Prob. 12RQCh. 9 - What is a dual-purpose test?Ch. 9 - Prob. 14RQCh. 9 - Prob. 15RQCh. 9 - Prob. 16RQCh. 9 - What would be the difference between an attributes...Ch. 9 - Prob. 18RQCh. 9 - Prob. 19RQCh. 9 - Prob. 20RQCh. 9 - Prob. 21RQCh. 9 - Prob. 22RQCh. 9 - Prob. 23RQCh. 9 - Prob. 24RQCh. 9 - Prob. 25RQCh. 9 - Prob. 26RQCh. 9 - Prob. 27RQCh. 9 - Prob. 28RQCh. 9 - Prob. 29QRACh. 9 - Prob. 30QRACh. 9 - Prob. 31QRACh. 9 - Prob. 32QRACh. 9 - Prob. 33QRACh. 9 - Prob. 34QRACh. 9 - Prob. 35QRACh. 9 - Prob. 36QRACh. 9 - Prob. 37AOQCh. 9 - Prob. 37BOQCh. 9 - Prob. 37COQCh. 9 - Prob. 37DOQCh. 9 - Prob. 37EOQCh. 9 - Prob. 37FOQCh. 9 - Prob. 37GOQCh. 9 - Prob. 37HOQCh. 9 - Prob. 37IOQCh. 9 - Prob. 37JOQCh. 9 - Prob. 37KOQCh. 9 - Prob. 37LOQCh. 9 - Prob. 38OQCh. 9 - Prob. 39OQCh. 9 - For each term in the first column below, identify...Ch. 9 - Prob. 41OQCh. 9 - Smith, Inc. Rachel Robertson wishes to use...Ch. 9 - Prob. 43OQCh. 9 - Prob. 44PCh. 9 - Prob. 45PCh. 9 - Prob. 46PCh. 9 - Prob. 47PCh. 9 - In the audit of Potomac Mills, the auditors wish...Ch. 9 - Prob. 49PCh. 9 - Prob. 50PCh. 9 - Prob. 51PCh. 9 - Prob. 52ITC
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- Sample Size and Sampling Interval Determination: Monetary Unit Sampling. BlytheDrake is conducting an audit of Newman and is using MUS to select a sample of customer accounts receivable for confirmation. Newman’s accounts receivable are recorded at$10,000,000 and comprise 2,000 customer accounts. Drake has established the followingparameters for the investigation:∙ Risk of incorrect acceptance = 5%.∙ Tolerable misstatement = $250,000.∙ Expected misstatement = $50,000.Required:a. Determine the sample size and sampling interval that Drake used in the audit of Newman’s accounts receivable.b. Based on the calculations in part (a), briefly describe how Drake would select customeraccounts from the population of accounts receivable balances for confirmation.c. Holding all other factors constant, determine the sample size and sampling intervalassuming each of the following independent changes in Drake’s sampling parameters:1. Because of improvements in Newman’s internal control policies…arrow_forwardUsing difference estimation, an auditor has taken a sample of 75 from a population's 25,000 items; that population has a book value of $125,000. She found that in her sample the average audited value was $4.50, while the average book value was $5.20. What is the estimated total audited value of the population? Multiple Choice $125,000. $107,500. $108,173. $112,500.arrow_forwardAn auditor is going to choose a sample of accounts receivable balances at year end to test and has determined the appropriate sampling interval to be 4 with a random start of the second balance in the list. Presented below are the first 10 accounts in the list (in order). Determine the first 2 account balances (including the random start) that will be sampled and tested using the sampling interval. Beads Galore $678 Beads N Such $5,125 Island Time Beads $235 Premier Beads $4,020 Regal Beads $567 Seattle Bead Xchange $321 Shipwreck Beads $3,502 The Bead Place $870 The Bead Place Too $450 The Bead Place Too Phoenix $125arrow_forward
- The 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_forwardSample Size and Sampling Interval Determination: Monetary Unit Sampling. CaseyPaul is considering the use of MUS in examining Stanley’s accounts receivable, which wererecorded at $300,000. Using the audit risk model, Paul has identified a necessary risk ofincorrect acceptance of 10 percent and has established a tolerable misstatement of $25,000and an expected misstatement of $10,000.Required:a. Determine the necessary sample size for the audit of Stanley’s accounts receivable.b. Based on the sample size determined in part (a), what is the appropriate sampling interval?c. Briefly describe how Paul would select the sample from a computerized customer listthat Stanley maintains.d. How would each of the following changes in Paul’s sampling plan impact the sample size andsampling interval? For each change, use the original parameters noted in the problem. (Verifyyour answer by calculating the sample size associated with each change.)1. A reduction in the necessary level of the risk of…arrow_forwardSample Size Relationships: Monetary Unit Sampling. Noel Frehley is examining theaccounts receivable of Kiss Company and is considering the use of MUS. Kiss’s accountsreceivable are recorded at $400,000. Based on the necessary level of risk, Frehley has established a risk of incorrect acceptance of 5 percent. In addition, based on previous audits,Frehley estimates misstatements of $10,000. Finally, based on the overall level of performance materiality, Frehley has established tolerable misstatement at $20,000.Required:a. Determine the necessary sample size for Frehley’s examination of Kiss Company’saccounts receivable.b. Assume that Frehley was interested in trying to reduce the necessary sample size. Whatare some options available in this regard?c. Based on a discussion with the senior manager, Frehley knows that increasing the level ofthe risk of incorrect acceptance will reduce sample size. For the same level of expectedmisstatement, tolerable misstatement, and population size,…arrow_forward
- Evaluating Results: Classical Variables Sampling. Kyle Berry is using mean-per-unit estimation in the audit of Leonard’s inventory balances. Leonard’s inventory is recorded at $240,000 and comprises 1,200 different items. Berry determined a sample size of 120 items and performed the appropriate substantive procedures. Based on this sample, he determined the following: Average audited value (per item) $204 Standard deviation of audited values $ 22 A summary of some additional parameters estimated by Berry follow: Tolerable misstatement $ 17,500 Expected misstatement $ 7,500 Risk of incorrect acceptance 5% Risk of incorrect rejection 10% Required:a. What is Berry’s estimate of the audited value of Leonard’s inventory?b. Calculate the precision and precision interval for Leonard’s inventory. Provide a briefdescription of the meaning of the precision interval.c. What is Berry’s conclusion with respect to Leonard’s inventory balance?d. Using a risk of incorrect…arrow_forwardEvaluating Sample Results: Nonstatistical Sampling. Finley Gunny is using nonstatistical sampling in the examination of Highway Company’s accounts receivable, which were recorded at $350,000. Gunny determined a tolerable misstatement of $15,000 and a sample size of 49 items.Required:a. How does Gunny determine sample size using nonstatistical sampling?b. If the items selected by Gunny had an aggregate recorded balance of $50,000 and an aggregate audited value of $45,000, calculate the estimated audited value.c. What would Gunny conclude with respect to the fairness of Highway’s accounts receivable?arrow_forwardA random sample of 200 from a population of 1000 accounts receivable. Total misstatement for the sample is $3000, total recorded amount for the sample is $60,000, total population recorded amount is $330,000. What is the estimated total population misstatement under difference estimation??arrow_forward
- Identify the factors an auditor uses to decide the appropriateARO. Compare the sample size for an ARO of 10% with that of 5%, all other factorsbeing equal.arrow_forwardSample Size Determination: Monetary Unit Sampling. The recorded accounts receivable balance for Warner Company was $500,000.Required:For each of the following independent sets of conditions, determine the appropriate samplesize for the examination of Warner’s accounts receivable in MUS. Based on the differencesin your calculations, identify the general relationship between different factors and samplesize. (RIA = risk of incorrect acceptance, TM = tolerable misstatement, EM = expectedmisstatement).a. RIA = 5%, TM = $50,000, EM = $10,000.b. RIA = 5%, TM = $50,000, EM = $25,000.c. RIA = 10%, TM = $50,000, EM = $10,000.d. RIA = 10%, TM = $50,000, EM = $25,000.arrow_forwardEvan Kristopher, CPA intends to use probability-proportional-to-size sampling. He has properly selected and audited a sample of 100 accounts receivable from his client’s population of 3,000 accounts. He calculated a sampling interval of $6,000 and the tolerable misstatement for the account is $30,000. Evan also recalls that “basic precision” is equal to the appropriate reliability factor multiplied times the sampling interval. He wishes to accept a risk of incorrect acceptance of 10%. He found that 97 of the 100 accounts in the sample were properly calculated. However, the following three errors existed: Book Value Audited Value $75 $70 1,000 750 9,300 6,720 Required: Calculate the projected misstatement. Calculate the basic precision. Calculate the incremental allowance. Calculate the upper limit on misstatement. What would the auditors’ conclusion be for the population based on the analysis?arrow_forward
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