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Unformatted text preview: $ XBar = $60,000 TM = $50,000 UML > XBar > TM Therefore, reject the balance as being fairly stated. ETF = the expected tainting factor or average percent of misstatement assumption usually = 1.00 UML = upper misstatement limit x j = recorded value of item j BV = total population recorded dollars a j = audited value of item j R (Poisson rate from table) d j = x ja j I = Interval = BV/n Is the balance fairly stated? => Is UML < TM? We need UML UML = Projected Misstatement (PM) + Allowance for Sampling Risk Allowance for Sampling Risk = Basic Precision(BP) + Incremental Allowance(IA) UML = BP + IA + PM or more formally BP = BV/n*R *ETF= I * R *ETF = TM (AM*EEF) n IA = I * Sum (R j R i1 1)*(d i /x i ) for all x i < (BV/n) i=1 where we order the d i as follows: (d 3 /x 3 ) < (d 2 /x 2 ) < d 1 /x 1 Upper Misstatement Limit Calculation...
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 Fall '08
 MONIKACAUSHOULLI

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