Question

You are planning to use monetary unit sampling to evaluate accounts receivable for Violet Company. The accounts receivable account totals $3,000,000. You have assessed a risk of incorrect acceptance of 5 percent, a tolerable misstatement of $120,000, and an expected misstatement of $24,000.

a. Calculate the sample size and sampling interval.

b. Regardless of your answer to (a), use a sample size of 125 and the related sampling interval and calculate the upper limit on misstatements assuming you found the following differences.

Account | Recorded Value | Audit Value | Difference |

102 | $2,000 | $600 | $1,400 |

235 | $3,200 | $1,920 | $1,280 |

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Answer #1

You are planning to use monetary unit sampling to evaluate
accounts receivable for Purple Company. The accounts receivable
account totals $4,000,000. You have assessed a risk of incorrect
acceptance of 5 percent, a tolerable misstatement of $140,000, and
an expected misstatement of $25,200.
a. Calculate the sample size and sampling interval.
b. Regardless of your answer to (a), use a sample size of 125
and the related sampling interval and calculate the upper limit on
misstatements assuming you found the...

Upper Limit on Misstatements Calculation: Monetary Unit
Sampling. Jordan Thomas is using MUS to examine a client’s accounts
receivable balance. Using a risk of incorrect acceptance of 5%, a
tolerable misstatement of $65,000, 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
Questions:
1) What is the projected misstatement?
2) What is the basic allowance for sampling
risk?...

Upper Limit on Misstatements Calculation: Monetary Unit
Sampling. Jordan Thomas is using MUS to examine a client’s accounts
receivable balance. Using a risk of incorrect acceptance of 5%, a
tolerable misstatement of $65,000, 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
Questions:
1) What is the projected misstatement?
2) What is the basic allowance for sampling
risk?...

AP10.7 (LO 8) PPS sampling Edwards
has decided to use probability-proportional-to-size (PPS) sampling
in the audit of a client's accounts receivable balance. Few, if
any, errors of overstatement are expected.
Edwards plans to use the following PPS sampling table:
5% RELIABILITY FACTORS FOR
OVERSTATEMENTS
Number of
Overstatements
Risk of Incorrect Acceptance
1%
5%
10%
15%
20%
0
4.61
3.00
2.31
1.90
1.61
1
6.64
4.75
3.89
3.38
3.00
2
8.41
6.30
5.33...

The auditors are using mean-per-unit sampling to evaluate the
reasonableness of the book value of the accounts receivable of
Smith, Inc. Smith has 10,000 receivable accounts with a total book
value of $800,000. The auditors estimate the population's standard
deviation as being equal to $25. After examining the overall audit
plan, the auditors believe that the account's tolerable
misstatement is $40,000, and that a risk of incorrect rejection of
.10 (risk coefficient = 1.64) and a risk of incorrect acceptance...

the audit team sets tolerable misstatement at $3,000,000,
expected misstatement at $1,750,000, and risk of incorrect
acceptance at 37%. You use a sample size of 73 confirmations. The
sampling interval is $981,134. You may assume that except for the
following, you received confirmations from customers that showed no
exceptions. Determine whether the following conditions represent
errors for purposes of your evaluation. Based on your evaluation
and the parameters of the sample you designed above, evaluate the
result of confirming accounts...

Assume that you are preparing to confirm accounts receivable at
December 31, 2022, which is one month prior to the fiscal year-end
of January 31, 2023. The book value of gross accounts receivable is
$71,622,804. Complete the following requirements related to the
confirmation of receivables for Cloud 9 based on previous work and
the following information. Required Using PPS sampling, determine
the sample size that you want to use for sending accounts
receivable confirmations. Draw on the information you learned...

In a monetary unit sample with a sampling interval of $22,900,
an auditor discovered that a selected account receivable with a
recorded amount of $10,000 had an audit amount of $2,600. Calculate
the projected misstatement for this one item.

9-22. The firm of Le and Lysius was conducting the audit of
Coomes Molding Corporation for the fiscal year ended October 31.
Michelle Le, the partner in charge of the audit, decides that MUS
is the appropriate sampling technique to use in order to audit
Coomes’ inventory account. The balance in the inventory at October
31 was $4,250,000. Michelle has established the following: risk of
incorrect acceptance = 5% (i.e., the desired confidence level of
95%), tolerable misstatement = $212,500,...

Below are descriptions of how key parameters are determined in a
monetary unit sampling application. Indicate, using the correct
letter, which parameter is most closely associated with the
description. Each parameter is associated with only one
description.
A) Tainting percentage.
B) Sample size.
C) Actual misstatement.
D) Population size.
E) Expected misstatement.
F) Tolerable misstatement.
Estimated based on prior audits or a pilot sample of current
balances.
Determined based on the recorded amount of the account balance
or class...

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