You are testing the sales account of Kappa Ltd for possible material misstatement.
Listed below are the initial 20 items from the population of sales invoices:

Required:
(a) Using traditional systematic sampling, which sales invoices will be the first 3 included in the sample? Show all calculations. 

(b) Using Dollar Unit Sampling (DUS) with selection by a systematic sampling technique, which sales invoices will be the first 3 included in the sample?
Show all calculations.

(c) If the total amount for the samples is $800,000 and the misstatement found in the samples is $100,000, explain whether the sales account is materially misstated.
Show all calculations. 

(d) What possible courses of action can you take for your results in part (c)? 

(e) Identify two (2) other accounts in the client’s Statement of Financial Position where you would use DUS. Explain your answer.
 

Transcribed Image Text:

Invoice No. 1 234567 2 4 8 9 10 Amount ($) 4,048 1,690 9,706 5,669 2,093 2,242 2,645 7,521 27,358 977 Invoice No. 11 12 13 14 15 16 17 18 19 20 Amount ($) 17,836 20,998 13,167 1,771 2,301 37,318 50,853 1,897 14,375 4,347 The total of the sales account is $4,500,000, consisting of 300 items. A sample of 50 items is to be selected with a random start of 3. The tolerable error is set at $500,000. Invoice No. 1 234567 2 4 8 9 10 Amount ($) 4,048 1,690 9,706 5,669 2,093 2,242 2,645 7,521 27,358 977 Invoice No. 11 12 13 14 15 16 17 18 19 20 Amount ($) 17,836 20,998 13,167 1,771 2,301 37,318 50,853 1,897 14,375 4,347 The total of the sales account is $4,500,000, consisting of 300 items. A sample of 50 items is to be selected with a random start of 3. The tolerable error is set at $500,000.

Answer rating: 100% (QA)

a The first invoice included in the sample would be invoice number 3 the second would be invoice num... View the full answer