Given: Population- 500 accounts Sample- 100 accounts Book Value of Sample- $20,000 Population Book Value- $75,000 Audit Value of Sample- $18,000 Tolerable error- $8,000 Using $ ratio estimation, the total projected error is Using $ ratio estimation, the total projected error is a. $8,000 b. $10,000 c. $7,500 d. $25,000 e. $17,000

Given: Population- 500 accounts Sample- 100 accounts Book Value of Sample- $20,000 Population Book Value- $75,000 Audit Value of Sample- $18,000 Tolerable error- $8,000 Using $ ratio estimation, the total projected error is Using $ ratio estimation, the total projected error is a. $8,000 b. $10,000 c. $7,500 d. $25,000 e. $17,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Monetary Unit Sampling with IDEA: Determining Sample Size. Assume that your audit team has established the following parameters for the examination of ELM’s sales transactions: Risk of incorrect acceptance 10% Tolerable misstatement $311,711 (or 8% of the recorded balance of the transactions) Expected misstatement $77,928 (or 2% of the recorded balance of the transactions) Required:a. Use IDEA to determine the necessary sample size, given the above parameters.Parts (b), (c), and (d) are independent scenarios that affect the sample size in this example.b. Assume that your audit team has decided to increase their reliance on internal controland permit a corresponding increase in the risk of incorrect acceptance from 10 percentto 15 percent, which maintains overall audit risk at the same level. What is the necessarysample size, holding all other factors constant?c. Assume that your audit team has decided to reduce the level of tolerable misstatementfrom $311,711 to $233,783 (or…
task 2. expected loss 300. find the variance and standard deviation
d. 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?
Chapter 08 Problem 8-26 LO 8-6 Use the sample sizes and the number of deviations determined below. Control Procedure 2 3 5% 10 % 5% 7% 2% 3 % Parameters Risk of incorrect acceptance Tolerable deviation rate Expected population deviation rate Sample size (using tables) Sample size (using IDEA) Results Number of deviations Sample size Sample deviation rate 1 5 % 4% 1 % Computed upper deviation rate using Tables 1-Sided upper limit using IDEA Auditor's conclusion 156 156 181 181 Does support Determine the sample deviation rate, the computed upper deviation rate, and the auditor's conclusion (i.e., testing results do or do not support operating effectiveness of the control) for each control procedure. (For Results, use Table 8-8 & Table 8-9 or IDEA) (Round your rates values to 1 decimal place.) 0 156✔ 0 2.0 ✓✔ 94 94 % % % 4 10% 8% 4% 98 98 X Answer is not complete. Control Procedure 2 Does not support 5 181✔ 2.8 6.9 ✓ % % % 3 Does not support 4 94✔ 4.3 8.7 3 333 % % % 4 Does support 3 98✔✔…
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Sample Size and Sampling Interval Determination: Monetary Unit Sampling. Reagan Simmons is conducting the audit of Ace Inc., and is using MUS to select a sampleof inventory items for examination. The recorded balance in Ace’s inventory account was$1,200,000. In carrying out the sampling plan, Simmons established a risk of incorrectacceptance of 5 percent, a tolerable misstatement of $100,000, and an expected misstatement of $20,000.Required:a. What parameters would Simmons consider in determining the sample size for Ace’sinventory?b. How would Simmons identify or establish each of these parameters?c. Determine the necessary sample size for the audit of Ace’s inventory.d. Based on the sample size determined in part (c), determine the appropriate samplinginterval.e. Briefly describe how Simmons would select the sample from a computerized inventorylist that Ace maintains.
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