MPU Estimation

Data relative to three MPU estimation plans are presented below.

$123$

Tolerable misstatement $$110,000$ $$140,000$ $$170,000$

Size of population $5,0006,0008,000$

Risk of incorrect rejection $10\%5\%10\%$

Estimated population standard deviation $$80$ $$105$ $$125$

Risks that misstatements accumulating to greater than

tolerable misstatements will not be detected by:

Internal control $50\%40\%40\%$

Other substantive procedures

$($excluding this test of details$)$

$25\%50\%85\%$

Desired overall audit risk $5\%5\%5\%$

Inherent risk $100\%100\%100\%$

Analysis: Determine an appropriate risk of incorrect acceptance for each population. $($Round answersto $2$

decimal places, e$.$g$.52\mathrm{.}75.)$MPU Estimation

Data relative to three MPU estimation plans are presented below.

$($a$)$

Analysis: Determine an appropriate risk of incorrect acceptance for each population. $($Round answers to $2$ decimal places, e$.$g$.52\mathrm{.}75.)$

$1$

$2$

$3$

Appropriate risk of

incorrect acceptance