Evaluating a PPS sample Assume the following misstatements were found in a PPS sample:

Sample Item Book Value Audit Value

1              $  650      $    585      

2                  540         0      

3                1,900         0      

4                2,200      1,650      

5                2,800      2,660      

a. Calculate the projected misstatement assuming:

• The sampling interval was $1,800.
• The sampling interval was $ 2,000.

b. If a risk of incorrect acceptance of 15% is specified in the sample design, the sampling interval is $2,000, and five misstatements are found as enumerated above, calculate:

• Basic precision.
• The incremental allowance for sampling risk.
• The upper misstatement limit.

c. If tolerable misstatement were $50,000 and expected misstatement were $10,000, what conclusion would you reach based on your results in (b)?