Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN: 9781305080577
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: South-Western College Pub
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 8, Problem 58RSCQ
a.
To determine
To calculate:
b.
To determine
To calculate: Total estimated misstatements.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Assume that you are auditing the inventory of Husky Manufacturing Company for the year ended December 31, 2015, and you are using MUS. The book value is $8,124,998.66. The risk of incorrect acceptance is 10% (90% confidence level). The tolerable misstatement is $275,000, and expected misstatement is $80,000, so the ratio of expected misstatement to tolerable misstatement is 29%. The ratio of tolerable misstatement to the population book value is 4.3%.
Calculate the sample size and the sampling interval.
Calculate the total estimated misstatement assuming the following misstatements were found in the sample:
Book value
Audit value
$41,906.45
$36,906.45
$335,643.28
$333,643.28
What conclusion do you reach based upon your calculation?
You are evaluating audit results for current assets for your audit client Pepper Ltd.
You take a random sample of inventory items worth $10,000 for price test and detect $1,000 worth of overstatements. The total carrying value of inventory is $100,000 and sampling error is $2,000. What is the total estimated misstatement for inventory account?
An audit firm is conducting the audit of Diaz Construction Company for the fiscal year ended October 31. Rebecca Smith, the partner in charge of the audit, decides that MUS is the appropriate sampling technique to use in order to audit Diaz’s inventory account. The balance in the inventory at October 31 was $4,250,000. Rebecca has established the following: risk of incorrect acceptance = 5% (i.e., the desired confidence level of 95%), tolerable misstatement = $212,500, and expected misstatement = $63,750. Calculate the sample size and sampling interval using Table 8-5 in the textbook (round your interval answer to the nearest whole number).
Chapter 8 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
Ch. 8 - Prob. 1TFQCh. 8 - Prob. 2TFQCh. 8 - Prob. 3TFQCh. 8 - Prob. 4TFQCh. 8 - Prob. 5TFQCh. 8 - Prob. 6TFQCh. 8 - Prob. 7TFQCh. 8 - Prob. 8TFQCh. 8 - Prob. 9TFQCh. 8 - Prob. 10TFQ
Ch. 8 - Prob. 11TFQCh. 8 - Prob. 12TFQCh. 8 - Prob. 13TFQCh. 8 - Prob. 14TFQCh. 8 - Prob. 15MCQCh. 8 - Prob. 16MCQCh. 8 - Prob. 17MCQCh. 8 - Prob. 18MCQCh. 8 - Prob. 19MCQCh. 8 - Prob. 20MCQCh. 8 - Prob. 21MCQCh. 8 - Refer to Exhibit 8.6. Assume a 5% risk of...Ch. 8 - Prob. 23MCQCh. 8 - Prob. 24MCQCh. 8 - Prob. 25MCQCh. 8 - Prob. 26MCQCh. 8 - Prob. 27MCQCh. 8 - Prob. 28MCQCh. 8 - Prob. 29RSCQCh. 8 - Prob. 30RSCQCh. 8 - Prob. 31RSCQCh. 8 - Prob. 32RSCQCh. 8 - Prob. 33RSCQCh. 8 - Prob. 34RSCQCh. 8 - Prob. 35RSCQCh. 8 - Prob. 36RSCQCh. 8 - Prob. 37RSCQCh. 8 - Prob. 38RSCQCh. 8 - Prob. 39RSCQCh. 8 - Prob. 40RSCQCh. 8 - Prob. 41RSCQCh. 8 - Prob. 42RSCQCh. 8 - Prob. 43RSCQCh. 8 - Prob. 44RSCQCh. 8 - Prob. 45RSCQCh. 8 - Prob. 46RSCQCh. 8 - Prob. 47RSCQCh. 8 - What is stratification? Distinguish between...Ch. 8 - Prob. 49RSCQCh. 8 - Prob. 50RSCQCh. 8 - Prob. 51RSCQCh. 8 - Prob. 52RSCQCh. 8 - Prob. 53RSCQCh. 8 - Prob. 54RSCQCh. 8 - Prob. 55RSCQCh. 8 - Prob. 56RSCQCh. 8 - Prob. 57RSCQCh. 8 - Prob. 58RSCQCh. 8 - Prob. 59RSCQCh. 8 - Prob. 60RSCQCh. 8 - Prob. 61RSCQCh. 8 - Prob. 62RSCQCh. 8 - Prob. 63RSCQ
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- You are the auditor of Unet Incorporated, an auto air-conditioner service and repair company, and you have decided to use the mean- per-unit method to test the existence and gross valuation of recorded accounts receivable. The client's records include 10,000 accounts with a total book value of $2,500,000. You decide to use tolerable misstatement of $182,000, an incorrect acceptance risk of 5 percent, and an incorrect rejection risk of 4.6 percent. Using Excel, you estimated the standard deviation of the population as $100. Required: a. Determine the sample size. b1. The mean audited value of the accounts in the sample was $244. Assuming that the standard deviation of the sample's audited value is also $100, what is the projected misstatement for the population? b2. Will you accept this account as not being materially misstated? c1. Assuming that the standard deviation of the sample's audited value is $125, what is the projected misstatement for the population? c2. Will you accept this…arrow_forwardwhats the answer in the 2nd number?arrow_forwardThe 4,000 accounts receivable of GHI Company have a total book value of $60,000. Bob Smith, Certified Public Accountant (CPA), has selected and audited a sample of 100 accounts with a total book value of $1,600. Using the mean-per-unit estimation technique, Smith has properly estimated a projected misstatement of a $8,000 overstatement for the entire population. The audited value of Smith's sample is: Multiple Choice $1,600 $1,800 $1,300 $1,400arrow_forward
- You are auditing the accounts receivable for Conor Company as of December 31, 2022 One of your procedures was to send positive confirmations to a sample of 50 accounts. Of those 50 confirmations, 40 have been positively confirmed without comments, 7 had minor differences that have been cleared satisfactorily. The remaining 3 had the following comments: “We received $6,000 of goods on consignment on November 20, 2022. We have not sold them yet.” “We received these goods on January 5, 2023 and mailed a check on January 7, 2023.” “The balance of $2,000 was paid on December 10, 2022.” For each of these comments, identify the steps that you would take to clear (resolve) them.arrow_forwardHardevarrow_forwardThe 1,500 accounts receivable of DEF Company have a total book value of $30,000. Bob Smith, Certified Public Accountant (CPA), has selected and audited a sample of 50 accounts with a total book value of $1,050. Using the difference estimation technique, Smith has properly estimated a projected misstatement of an overstatement of $3,000 for the entire population. The total audited value of Smith's sample is: Multiple Choice $900 $1,150 $850 $950arrow_forward
- whats the answer in question 1?arrow_forwardAssume that you are preparing to confirm accounts receivable at December 31, 2025, which is one month prior to the fiscal year - end of January 31, 2026. 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:a. Using PPS sampling, determine the sample size that you want to use for sending accounts receivable confirmations. You make the following assumptions.You set tolerable misstatement for accounts receivable at $3,500,000. Expected misstatement = $750,000. Risk of incorrect acceptance = 37%. Given these parameters: 1. What do you calculate for sample size? 2. What do you calculate for the sampling interval?arrow_forwardss.arrow_forward
- The 1,000 accounts receivable of Gamco Company have a total book value of $20,000. Wilbur Schneitz, Certified Public Accountant (CPA), has selected and audited a sample of 50 accounts with a total book value of $900. Using nonstatistical variables sampling and the difference estimation technique, Smith has properly estimated a projected misstatement of an overstatement of $3,000 for the entire population. The total audited value of Schneitz’s sample is: 650 1000 750 900arrow_forwardPlease help mearrow_forwardHattab auditing Co. was conducting the audit of Metro market for the fiscal year ended December 31. The auditor decides that MUS is the appropriate sampling technique to use in order to audit Metros’ inventory account. The balance in the inventory at December 31 was $3,000,000. The auditor has established the following: the desired confidence level of 90%, tolerable misstatement $270,500, and expected misstatement $65,500. Requirement: 1- Calculate the sample size and sampling interval. 2- The staff accountant performed the audit procedures listed in the invent+ory audit program for each sample item. Using the sample size computed in requirement (1), calculate the upper limit on misstatement based on the following misstatements. Error Number Book Value Audit Value 1 6,000 $ 1,000 $ 2 24,000 $ 39,000 $ 3 55,000 $ 57,000 $arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
The KEY to Understanding Financial Statements; Author: Accounting Stuff;https://www.youtube.com/watch?v=_F6a0ddbjtI;License: Standard Youtube License