L12 Notes_Part_3 - is materially misstated and 3...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Before PPS: Stratification & Point Estimate Stratum Stratum Criteria N Dollars in pop’n n Recorded Value Audited Value Client Error 1 >$10,000 3 $88,955 3 $88,955 $91,695 <$2,740> 2 $5M-$10M 10 $71,235 6 $43,995 $43,024 971 3 <$5,000 27 $47,105 6 $13,105 $10,947 $2,158 40 $207,295 15 $146,055 $145,666 $389 Client Error X Recorded Bk. Value = Point Recorded Value from Sample from Statum Estimate 1. $2,740/ $88,955 X $88,955 = <$2,740> 2. 971/43,995 X $71,235 = 1,572 3. 2,158/13,105 X $47,105 = 7,757 $6,589 Not just amount but also risk (e.g., aged A/R)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Substantive Test of Details of Balances Determining Sample Size When testing balances, use these terms 1. Materiality: T olerable M isstatement (TM) , maximum estimated amount of error leading to a clean opinion 2. Risk: A cceptable R isk of I ncorrect A cceptance (ARIA), the risk that the auditor is willing to take of concluding that the account balance is not materially misstated when, in fact, it
Background image of page 2
Background image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: is materially misstated , and 3. Expectation: A nticipated M isstatement (AM), estimated amount of dollar error suggested by a preliminary sample or last year’s workpapers). Monetary-Unit Sampling (MUS) Advantages of MUS 1. Smaller sample sizes: When the auditor expects no misstatement, MUS usually results in a smaller sample size than classical variables sampling. 2. Don’t need an estimate of standard deviation: The calculation of the sample size and evaluation of the sample results are not based on the variation between items in the population. 3. Increases likelihood of selecting larger items: easier than stratifying 4. Can reduce costs: Several sampled dollars can be tested by reviewing one document 5. As easy to use as attribute sampling 6. better than attribute sampling which expresses results in terms of number of errors; MUS expresses errors in dollar terms....
View Full Document

This note was uploaded on 10/05/2011 for the course ACG 5637 taught by Professor Monikacaushoulli during the Fall '08 term at University of Florida.

Page1 / 3

L12 Notes_Part_3 - is materially misstated and 3...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online