Upper Limit on Misstatements Calculation: Monetary Unit Sampling. Jordan Thomas is using MUS to examine a client’s accounts receivable balance. Using 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 Required:a. Calculate the upper limit on misstatements assuming a risk of incorrect acceptance of (1) 5 percent and (2) 10 percent.b. Based on your calculations in part (a), comment on the relationship between the risk of incorrect acceptance and the upper limit on misstatements.
Upper Limit on Misstatements Calculation: Monetary Unit Sampling. Jordan Thomas is using MUS to examine a client’s accounts receivable balance. Using 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 Required:a. Calculate the upper limit on misstatements assuming a risk of incorrect acceptance of (1) 5 percent and (2) 10 percent.b. Based on your calculations in part (a), comment on the relationship between the risk of incorrect acceptance and the upper limit on misstatements.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Upper Limit on Misstatements Calculation: Monetary Unit Sampling. Jordan Thomas is using MUS to examine a client’s
| Item | Recorded Balance | Audited Value |
| 1 | $15,000 | $12,500 |
| 2 | 10,000 | 4,000 |
| 3 | 3,000 | 2,000 |
Required:
a. Calculate the upper limit on misstatements assuming a risk of incorrect acceptance of (1) 5 percent and (2) 10 percent.
b. Based on your calculations in part (a), comment on the relationship between the risk of incorrect acceptance and the upper limit on misstatements.
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