The following decisions about the audit of inventory for ABC Inc. have been determined by the partner-in-charge:
Question:
The following decisions about the audit of inventory for ABC Inc. have been determined by the partner-in-charge:
Total recorded value | $1,200,000 |
Materiality | $100,000 |
Sample size | 60 |
Average percent of error assumption - overstatements | 50% |
Average percent of error assumption - understatements | 50% |
Acceptable risk of incorrect acceptance | 10% |
what are the adjusted overstatement and understatement bounds?
Number of Misstatements | Misstatement Unit Error Assumption | Sample Size | Recorded Population | Point Estimate | Bounds |
Initial overstatement bound | |||||
Understatement misstatements | |||||
1 | 60 | 1,200,000 | |||
2 | 50 | 1,200,000 | |||
Sum | |||||
Adjusted overstatement bound | 5 marks |
Number of Misstatements | Misstatement Unit Error Assumption | Sample Size | Recorded Population | Point Estimate | Bounds |
Initial understatement bound | |||||
Overstatement misstatements | |||||
1 | 50 | 1,200,000 | |||
2 | 50 | 1,200,000 | |||
3 | 50 | 1,200,000 | |||
Sum | |||||
Adjusted understatement bound |
Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley