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1004 MUS HO

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

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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 from Table using RIA & │ 0 Overstatement Errors. Expansion Factor from Table using RIA. └──────────────────────────────────────────────────┘ BV b. Sampling Interval (SI) = ──── = \$11,333.33 n ════════════ 1

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MUS SAMPLING - STEPS 5 - 7 STEP 5. Determine Method of Selecting Sample - Systematic STEP 6. Perform Sampling Plan STEP 7. Evaluate & Project Results 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 ═════════ ┌───────────────────────────────────────────────────┐ │Note: The reliability factor is found by using the│ 2
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1004 MUS HO - MUS SAMPLING STEPS 1 4 STEP 1 Objective of...

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