Bullhead City

Below is the information from the PPS example that we did manually in class.

The auditors wish to test the valuation of accounts receivable in the audit of Desert Enterprises of Bullhead City. The client has $500,000 of total recorded receivables, composed of 850 accounts. The auditors have determined the following:

Tolerable misstatement $25,000 Risk of incorrect acceptance 5% Expected misstatement $2,000

Assume that the auditors have tested the sample and discovered three misstatements:

Book Value Audited Value

$ 50 $ 47

800 760

8,500 8,100

Required:

Work this problem using ACL. A similar problem was done manually in class (see lecture notes). Note the following:

ACL	TEXT
Monetary	PPS sampling
Confidence	Risk of incorrect acceptance (RIA). Keep in mind that confidence = 1 RIA (e.g., if %, confidence = 90%).
Materiality	Tolerable misstatement
Expected Total Errors	Expected misstatement
Interval	Sampling interval
Most Likely Error	Projected misstatement
Upper Error Limit	Upper limit on misstatement

Open up any project that has a table. Then calculate responses to questions 1 and 2 using Sample Calculate Sample Size command:

Required sample size?

Sampling interval?

(continued on the next page)

Calculate responses to questions 3 through 6 using Sample Evaluate Error command. Note that in the Errors field you need to list item and its error in the following format: [amount, error], as shown below for the first two misstatements and their errors. You just need to add the third misstatement and its error to the list and fill out the Confidence and the Interval fields.

Projected misstatement?

Basic precision?

Incremental allowance?

Upper limit on misstatement?