L12 Notes_Part_10 - receivable balances of an agricultural...

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Steps in MUS Sampling Application UML > TM $152,744 > $125,000 Reject A/R balance as being fairly presented. If rejection occurs, what steps can be taken to reduce detection risk? 1. expand audit tests 2. increase sample size 3. adjust account balance 4. requires client correct population 5. qualify opinion 6. obtain more persuasive evidence which relates more closely to your objective
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Risk When Evaluating Account Balances Auditor's Decision Based on Sample Evidence Not Materially Misstated Materially Misstated Supports the fairness of the account balance Correct decision Risk of incorrect acceptance (Type II) Does not support the fairness of the account balance Risk of incorrect rejection (Type I) Correct Decision True State of Financial Statement Account
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PPS Sampling Chapter 16 P8 You are conducting monetary unit sampling (MUS) of the accounts
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Unformatted text preview: receivable balances of an agricultural co-op. You are willing to accept a 5 percent risk of incorrect acceptance, the book value of the account is $2,500,000 and your sample size (based on a tolerable misstatement of $128,000, an expected tainting factor of 100 percent and an anticipated misstatement of zero) is 59. The results of your sample are on the next slide: a. Using the results of your sample and an assumed tainting factor of 100 percent, calculate the upper misstatement limit (UML). Interpret the result. b. Repeat part a but with actual tainting factors. Interpret the difference between that result and the result from part a. c. Calculate the UML (using actual tainting factors) assuming a 10 percent ARIA as opposed to a 5 percent level. Why is the result different from your result in part b?...
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L12 Notes_Part_10 - receivable balances of an agricultural...

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