Problem 4 Monetary Unit Sampling - Upper Limit on Misstatements (The Monetary Unit Sampling Tables are on the last page of this handout.) Risk of Incorrect Acceptance 5%, Book Value of Accounts Receivable $500,000 Items found with misstatements in the accounts receivable sample Audit Value Book Value Projected Value Included in Incremental Allowance Projected Misstatements Interval $1,000 $1,600 $4,000 Yes No $800 $740 $4,000 Yes No $2,800 $5,000 $4,000 Yes No A) Calculate the Projected Misstatement Calculate the Basic Precision B) $ $ $ C) Calculate the Incremental Allowance Reliability Factor Increments x Misstatements (Largest First) = Incremental Allowance 1. Overstatement 1 - Overstatement 0-1 2. Overstatement 2- Overstatement 1 - 1 3. Overstatement 3 - Overstatement 2-1 D) Calculate the Upper Limit on Misstatement $ Problem 4 Monetary Unit Sampling - Upper Limit on Misstatements (The Monetary Unit Sampling Tables are on the last page of this handout.) Risk of Incorrect Acceptance 5%, Book Value of Accounts Receivable $500,000 Items found with misstatements in the accounts receivable sample Audit Value Book Value Projected Value Included in Incremental Allowance Projected Misstatements Interval $1,000 $1,600 $4,000 Yes No $800 $740 $4,000 Yes No $2,800 $5,000 $4,000 Yes No A) Calculate the Projected Misstatement Calculate the Basic Precision B) $ $ $ C) Calculate the Incremental Allowance Reliability Factor Increments x Misstatements (Largest First) = Incremental Allowance 1. Overstatement 1 - Overstatement 0-1 2. Overstatement 2- Overstatement 1 - 1 3. Overstatement 3 - Overstatement 2-1 D) Calculate the Upper Limit on Misstatement $