L12 Notes_Part_8

L12 Notes_Part_8 - \$ Tolerable Misstatement 125,000 \$...

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UML = BP + IA + PM = Basic Precision + Incremental Allowance + Projected Misstatement or more formally n UML = I * Sum (R i – R i-1 )*(d i /x i ) for all x i < I i=0 n + Sum d i for all x i > I i=1 If i = 0, then R 0-1 = 0 and d 0 /x 0 = ETF which is typically assumed to be 1 BP = I * R 0 * ETF n n PM = I * Sum d i /x i for all x i < I + Sum d i for all x i >I i=1 i=1 n IA = I * Sum (R j – R i-1 - 1)*(d i /x i ) for all x i < I i=1 where we order the d i as follows: d 1 /x 1 > d 2 /x 2 > d 3 /x 3 Upper Misstatement Limit Calculation

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Steps in MUS Sampling Application Evaluation 6. Calculate the projected misstatement and the upper limit on misstatement 7. Draw final conclusions. The misstatements detected in the sample must be projected to the population. Book value 2,500,000
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Unformatted text preview: \$ Tolerable Misstatement 125,000 \$ Sample size 93 Desired confidence level 95% Beta = ARIA = 5% (1-Beta) = 95% Anticipated Misstatement (AM) 27,722 \$ Sampling interval 26,882 \$ Example Information Steps in MUS Sampling Application Basic Precision If no misstatements are found in the sample, the best estimate of the population misstatement would be zero dollars . Sample Size 1 2 3 65 4.6 7.1 9.4 11.5 70 4.2 6.6 8.8 10.8 85 4.0 6.2 8.2 10.1 80 3.7 5.8 7.7 9.5 90 3.3 5.2 6.9 8.4 100 3.0 4.7 6.2 7.6 125 2.4 3.8 5.0 6.1 Actual Number of Deviations Found \$26,882 × 3.0 = \$80,646 upper misstatement limit They should have used a sample size of 90 or interpolated...
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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.

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L12 Notes_Part_8 - \$ Tolerable Misstatement 125,000 \$...

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