1004 MUS HO - MUS SAMPLING - STEPS 1 - 4 STEP 1. Objective...

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MUS SAMPLING - STEPS 1 - 4 STEP 1. Objective of Test - Determine reasonableness of accounts receivable STEP 2. Define Population - Individual dollars in account STEP 3. Select Sampling Technique - Probability Proportional to Size STEP 4. Determine Sample Size - Given: Tolerable misstatement (TM) $50,000 Risk of incorrect acceptance (RIA) .05 Expected Misstatement (EM) $10,000 Book Value of Population (BV) $1,000,000 Calculate: BV x Reliability Factor a. Sample Size (n) = ──────────────────────────── TM - (EM x Expansion Factor) $1,000,000 x 3 = ───────────────────────── = 88 $50,000 - ($10,000 x 1.6) ════ ┌──────────────────────────────────────────────────┐ │ NOTE: Reliability Factor 0 Overstatement Errors. Expansion Factor from Table using RIA. └──────────────────────────────────────────────────┘ BV b. Sampling Interval (SI) = ──── = $11,333.33 n ════════════ 1
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STEP 5. Determine Method of Selecting Sample - Systematic STEP 6. Perform Sampling Plan STEP 7. Given the following 3 misstatements, calculate upper limit on misstatement a. Calculate Projected Misstatement ┌──────────────────────────────────────────────────────┐ Sampling Projected │Book Value Audited Value Taint % Interval Misstatement│ │ $ 100 $ 95 5% $11,333 $ 567 11,700 11,488 * * 212 65 58.50 10% 11,333 1,133 ───────── Projected misstatement $ 1,912 ════════ └──────────────────────────────────────────────────────┘ * Not Applicable; book value large than sampling interval ┌──────────────────────────────────────────┐ │Note: Book Value - Audited Value │ Taint % = ────────────────────────── │ Book Value Example 100 - 95 5 (first error): ───────── =─────= 5% 100 100 └──────────────────────────────────────────┘ b. Calculate Basic Precision Basic Precision = Reliability Factor x Sampling Interval = 3.0 x $11,333.33 = $34,000
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This note was uploaded on 11/27/2011 for the course ACIS 4414 taught by Professor Staff during the Fall '08 term at Virginia Tech.

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1004 MUS HO - MUS SAMPLING - STEPS 1 - 4 STEP 1. Objective...

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