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Introduction:
Requirement 1 To calculate : Sample size and sampling interval.
Introduction: Total estimated misstatement is defined as the balance account free from the error and input and output both are in balanced condition.
Requirement 2 To calculate : The total misstatement of audit considers given book value and audit value.
Introduction:Total estimated misstatement is the balance form of the account. Its value should be below the tolerable limit of misstatement.
Requirement 3
To evaluate: Conclusion of the audit based on the results.
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Chapter 8 Solutions
Bundle: Auditing: A Risk Based-Approach, Loose-leaf Version, 11th + MindTap Accounting, 1 term (6 months) Printed Access Card
- 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_forwardYou are conducting an audit and have obtained the following figures with respect to sales and accounts receivable: 2021 2020 Accounts receivable $ 3,760,000 $ 2,950,000 Allowance for doubtful accounts $ 217,000 $ 211,000 Sales $ 25,850,000 $ 23,700,000 Required: What are the audit implications of these figures? Identify key audit steps that you would perform for any of the above accounts.arrow_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
- The 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_forwardIn an MUS sample with a sampling interval of $5,000, an auditor discovered that aselected accounts receivable with a recorded amount of $10,000 had an audit valueof $8,000. If this is the only error discovered by the auditor, the projected error ofthe sample would be(1) $1,000. (3) $4,000.(2) $2,000. (4) $5,000.arrow_forwardYou are evaluating audit results for assets in the audit ofRoberts Manufacturing. You set the preliminary judgment about materiality at $50,000.The account balances, performance materiality, and estimated overstatements in theaccounts are shown next.Account Performance Estimate of TotalAccount Balance Materiality OverstatementsCash $ 50,000 $ 5,000 $ 1,000Accounts receivable 1,200,000 30,000 20,000Inventory 2,500,000 50,000 ?Other assets 250,000 15,000 12,000Total $4,000,000 $100,000 ? a. Assume you tested inventory amounts totaling $1,000,000 and found $10,000 inoverstatements. Ignoring sampling risk, what is your estimate of the total misstatement in inventory?b. Based on the audit of the assets accounts and ignoring other accounts, are the overallfinancial statements acceptable? Explain.c. What do you believe the auditor should do in the circumstances?arrow_forward
- The accounting department of the client reports that the balance of Accounts Receivable is $210,000. Using classical variable sampling, the auditor computes an estimated total population value of $216,500 and computed a 95% achieved allowance for sampling risk of +- $8,500. The auditor should conclude that the accounts receivable balance is fairly stated. on Select one: O a. False Ob. True Iarrow_forwardAn auditor is determining the appropriate sample size for testinginventory valuation using MUS. The population has 2,620 inventory items valued at$12,625,000. The tolerable misstatement is $500,000 at a 10% ARIA. No misstatementsare expected in the population. Calculate the preliminary sample sizearrow_forwardThe 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_forward
- An auditor is using PPS Sampling to determine the projected error in Accounts Receivable. Two errors were discovered: Error #1: Book Value of $400, Audit Value of $100 Error #2: Book Value of $6,000, Audit Value of $2,000 The Sampling Interval was $2,000 Total Projected Error is: a. $2,100 b. $2,833 c. $4,300 d. $2,300 e. $5,500arrow_forwardYou are auditing the accounts receivable for Conor Company as of December 31, 2021. 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. Two of the responses had the following comments: a. “We never received these goods.” b. “The balance of $1,000 was paid on December 15, 2021.” For each of these comments, identify the steps that you would take to clear (resolve) them.arrow_forwardMazars Audit Firm is re-appointed as auditors in Beautiful Jewels for a year ended 31st March 2020. The overall level of acceptable audit risk of the client is considered as 10%. The inherent risk and control risk are assessed at 50% and 80% respectively. (i)Explain the meaning of 10% level of Audit Risk. (ii)Calculate the detection risk from the case let using the audit risk model Calculate the detection risk, if the audit risk falls down to 5% .arrow_forward
- Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
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