Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 17, Problem 26DQP
a.
To determine
Identify that each of the confirmation exceptions represents misstatements or not.
b.
To determine
State the total amount of misstatement in the accounts receivables population, ignore the sample risk.
c.
To determine
State the follow up actions to be considered if the population is not acceptable.
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James Duffney, CPA, has randomly selected and audited a sample of 100 of Will-Mart’s accounts receivable. Will-Mart has 6,140 accounts receivable accounts with a total book value of $6,000,000. Duffney has determined that the account’s tolerable misstatement is $500,000. His sample results are as follows:
Average audited value $962
Average book value 970
Required:
Calculate the accounts receivable estimated audited value and projected misstatement using the:
a. Mean-per-unit method.
b. Ratio method.
c. Difference method.
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
900
The 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
$950
Chapter 17 Solutions
Auditing And Assurance Services
Ch. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Prob. 3RQCh. 17 - Prob. 4RQCh. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - Prob. 7RQCh. 17 - Prob. 8RQCh. 17 - Prob. 9RQCh. 17 - Prob. 10RQ
Ch. 17 - Prob. 11RQCh. 17 - Prob. 12RQCh. 17 - Prob. 13RQCh. 17 - Prob. 14RQCh. 17 - Prob. 15RQCh. 17 - Prob. 16RQCh. 17 - Prob. 17RQCh. 17 - Prob. 18RQCh. 17 - Prob. 19RQCh. 17 - Prob. 20RQCh. 17 - Prob. 21.1MCQCh. 17 - Prob. 21.2MCQCh. 17 - Prob. 21.3MCQCh. 17 - Prob. 22.1MCQCh. 17 - Prob. 22.2MCQCh. 17 - Prob. 22.3MCQCh. 17 - Prob. 23.1MCQCh. 17 - Prob. 23.2MCQCh. 17 - Prob. 23.3MCQCh. 17 - Prob. 24.1MCQCh. 17 - Prob. 24.2MCQCh. 17 - Prob. 24.3MCQCh. 17 - Prob. 25DQPCh. 17 - Prob. 26DQPCh. 17 - Prob. 27DQPCh. 17 - Prob. 28DQPCh. 17 - Prob. 29DQPCh. 17 - Prob. 30DQPCh. 17 - Prob. 31DQPCh. 17 - Prob. 32DQPCh. 17 - Prob. 34DQPCh. 17 - Prob. 35DQP
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- A CPA company is conducting the audit of Finch Hardware Company for the year ended December 31. The senior-in-charge of the audit plans to use MUS to audit Finch’s inventory account. The balance at December 31 was $9,000,000, tolerable misstatement is $360,000, expected misstatement is $90,000, and the risk of incorrect acceptance is 5%. Compute the required MUS sample size and sampling interval using Table 8-5 in the textbook (round your interval answer to the nearest whole number).arrow_forwardAn auditor had decided to use probability-proportional-to-size (PPS) sampling, also called dollar-unit or cumulative monetary unit (CMU) sampling, in the audit of the client’s accounts receivable balance. The auditor discovered 3 misstatements while doing their testing. Complete the spreadsheet below and calculate the total projected misstatement.arrow_forwardAn external auditor of Roses Corporation sent out positive confirmation requests to 1,000 customers. Population size is 2,400 accounts, with a total recorded value of P400,000. Recorded value of samples selected is P159,960 and audited value of samples is P151,360. What is the estimated population audited value using ratio estimation? A. 400,000 B. 422,728 C. 378,480 Using the data provided in Roses Corporation, what is the projected misstatement using MPU estimation?A. 151,360 B. 20,640 C. 8,600arrow_forward
- Evaluating a Sampling Application. Tom Barton, an assistant accountant with a local CPAfirm, recently graduated from Other University. He studied statistical sampling for auditing in college and wants to impress his employers with his knowledge of modern auditingmethods.Barton decided to select a random sample of payroll checks for the test of controls usinga tolerable rate of deviation of 5 percent and an acceptable risk of overreliance of 5 percent. The senior accountant told Barton that 2 percent of the checks audited last year hadone or more errors in the calculation of net pay. He decided to audit 100 random checks.Because supervisory personnel had paychecks with higher amounts than production workers, he selected 60 of the supervisor checks and 40 checks of the others. He was very carefulto see that the selections of 60 from the April payroll register and 40 from the August payrollregister were random.The audit of this sample yielded two deviations, exactly the 2 percent rate…arrow_forwardEvan Kristopher, CPA intends to use probability-proportional-to-size sampling. He has properly selected and audited a sample of 100 accounts receivable from his client’s population of 3,000 accounts. He calculated a sampling interval of $6,000 and the tolerable misstatement for the account is $30,000. Evan also recalls that “basic precision” is equal to the appropriate reliability factor multiplied times the sampling interval. He wishes to accept a risk of incorrect acceptance of 10%. He found that 97 of the 100 accounts in the sample were properly calculated. However, the following three errors existed: Book Value Audited Value $75 $70 1,000 750 9,300 6,720 Required: Calculate the projected misstatement. Calculate the basic precision. Calculate the incremental allowance. Calculate the upper limit on misstatement. What would the auditors’ conclusion be for the population based on the analysis? explain pleasearrow_forwardEvan Kristopher, CPA intends to use probability-proportional-to-size sampling. He has properly selected and audited a sample of 100 accounts receivable from his client’s population of 3,000 accounts. He calculated a sampling interval of $6,000 and the tolerable misstatement for the account is $30,000. Evan also recalls that “basic precision” is equal to the appropriate reliability factor multiplied times the sampling interval. He wishes to accept a risk of incorrect acceptance of 10%. He found that 97 of the 100 accounts in the sample were properly calculated. However, the following three errors existed: Book Value Audited Value $75 $70 1,000 750 9,300 6,720 Required: Calculate the projected misstatement. Calculate the basic precision. Calculate the incremental allowance. Calculate the upper limit on misstatement. What would the auditors’ conclusion be for the population based on the analysis?arrow_forward
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