Question

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 of transactions.

  

Determined based on tolerable misstatement, expected misstatement, and the risk of incorrect acceptance.

  

Determined judgmentally by the auditor based on the overall financial statement materiality.

  

Calculated by dividing the recorded balance by the amount of actual misstatement detected.

  

Calculated as the difference between the recorded balance and the audited value of a logical unit comprising an account balance or class of transactions.

Answer 1

(A) Tainting percentage - Calculated by dividing the recorded balance by the amount of actual misstatement detected.

(B) Sample size - Determined based on the tolerable misstatement, expected misstatement, and the risk of incorrect acceptance

(C) Actual misstatement - Calculated as the difference between the recorded balance and the audited value of a logical unit comprising an account balance or class of transactions.

(E) Expected misstatement - Estimated based on prior audits or a pilot sample of current balances

(F) Tolerable misstatement - Determined judgmentally by the auditor based on the overall financial statement materiality