Question

_{b. If a risk of incorrect acceptance of 15% is specified in the sample design, the sampling interval is $2,000, and five misstatements are found as enumerated above, calculate: 1. Basic precision. 2. The incremental allowance for sampling risk. 3. The upper misstatement limit. AP10.8 (LO 8) Challenging Evaluating a PPS sample Assume the following misstatements were found in a PPS sample: Sample Item Book Value Audit Value $ 585 $ 650 540 1,900 2,200 1,650 2,660 2,800}

b. If a risk of incorrect acceptance of 15% is specified in the sample design, the sampling interval is $2,000, and five misstatements are found as enumerated above, calculate:

1. Basic precision.

2. The incremental allowance for sampling risk.

3. The upper misstatement limit.

Assume the following misstatements were found in a PPS sample:

Sample Item, Book Value, Audit Value

1   $ 650 585

2 540 0

3 1,900 0

4 2,200 1,650

5   2,800 2,660

Answer 1

Reliability Factor @15%:-

Risk of Incorrect Acceptance @15% 1.9 3.38 4.73 6.02 7.27 WN

Celularem o projected Misstatement -0- V Audited Misch terment a pook Value Taimling % Tiene Value logicked Sambling Mas thikmet 585 650 540 1900 2200 2800 0 1610 2660 65 10% 2000 200 510 100% 2000 2000 1900 100% 2000 2000 550 25% 2000 500 140 5% 2000 100 brojected Misstalemmk - $4800 Basic Puecision Reliability x lampling oleneval 161 » ~ 190 x 2000 3800 Amoumental Allo wamu Projecked_ ocumenbal Reliability mcu memek Towarmt-1 Mistakmurat Allonamus Faciet 1.90 3.38 1 4.73 6.02 7.27 1.48 48 2000 960 1.35 .35 2000 700 1.29 29 500 145 1.25 10025 4 mumemel Allowance - $ 1830 .25 ubber Limit_ O Miss takmemr - $4800 + $ 3800 + $18.30 Bucurested (Basic (Son cu anumbad Misstomom Beac sion) Allowances) $10930 y

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