a
Introduction:
Monetary Unit Sampling (MUS): It is a method used to gauge the amount of misstatement in financials. MUS helps auditors to overcome difficulties in other sampling systems. MUS is normally used for testing accounts related to monetary assets.
The
a
Answer to Problem 9.23P
Sample size = 156
Explanation of Solution
Tolerable misstatement :$360,000
Expected misstatement :$90,000
Desired confidence level :95%
Recorded amount of accounts receivable: $9,000,000
Computation of Sample size:
When tolerable misstatement is 4% and the expected misstatement is 1% sample size can be determined using table 8-5 as 156.
Computation of sampling interval:
b
Introduction:
Monetary Unit Sampling (MUS): It is a method used to gauge the amount of misstatement in financials. MUS helps auditors to overcome difficulties in other sampling systems. MUS is normally used for testing accounts related to monetary assets.
The Upper misstatement limit UML for the following misstatements.
b
Answer to Problem 9.23P
UML for misstatement:
- $43,269
- $32,365
- $86,538
- $16,153
Explanation of Solution
To calculate UML first sampling interval is required
Tolerable misstatement :$360,000
Expected misstatement :$90,000
Desired confidence level :95%
Recorded amount of accounts receivable : $9,000,000
Sample size :156
Sampling interval :$57,692
Computation of UML:
Computation of tainting factor:
| misstatements | Book value | Audit value | Difference | Tainting factorDifference ÷ book value |
| 1 | $10,000 | $7,500 | $2,500 | 0.25 |
| 2 | 9,000 | 6,000 | 3,000 | 0.33 |
| 3 | 60,000 | 0 | 60,000 | 1 |
| 4 | 800 | 640 | 160 | 0.2 |
Computation of Upper Misstatement limit:
| Misstatement | Tainting Factor1 | Sampling interval2 | Projected Misstatement3(1 × 2) | 95% Misstatement Factor. 4 | UML5(3 × 4) |
| 1 | 0.25 | $57,692 | $14,423 | 3 | $43,269 |
| 2 | 0.33 | 57,692 | 19,038 | 1.7 | 32,365 |
| 3 | 1 | 57,692 | 57,692 | 1.5 | 86,538 |
| 4 | 0.2 | 57,692 | 11,538 | 1.4 | 16,153 |
| Total | $102,691 | $178,325 |
The conclusion of whether inventory account balance is materially misstated is made by comparing the tolerable misstatement to the UML. As UML is $178,325 and it is less than the tolerable misstatement of $360,000, it can be concluded that the account balance is not materially misstated.
c
Introduction:
Monetary Unit Sampling (MUS): It is a method used to gauge the amount of misstatement in financials. MUS helps auditors to overcome difficulties in other sampling systems. MUS is normally used for testing accounts related to monetary assets.
The net projected population misstatement.
c
Answer to Problem 9.23P
Projected population misstatement is $6,750,000
Explanation of Solution
The projected population misstatement can be calculated by computing ratio of misstatements to total dollars sampled that is
| misstatements | Book value | Audit value | Difference |
| 1 | $10,000 | $7,500 | $2,500 |
| 2 | 9,000 | 6,000 | 3,000 |
| 3 | 60,000 | 0 | 60,000 |
| 4 | 800 | 640 | 160 |
| 5 | 6,000 | 6,500 | -500 |
| 6 | 750 | 800 | -50 |
| Total | 86,550 | 65,110 |
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Chapter 9 Solutions
Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
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Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning