Reference no: EM132472308
Question - Evaluating a PPS sample 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
|
Required -
a. Calculate the projected misstatement assuming:
The sampling interval was $1,800.
The sampling interval was $ 2,000.
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:
Basic precision.
The incremental allowance for sampling risk.
The upper misstatement limit.
c. If tolerable misstatement were $50,000 and expected misstatement were $10,000, what conclusion would you reach based on your results in (b)?