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Calculate the incremental allowance for sampling risk

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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)?

Reference no: EM132472308

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