The stratification calculation example in the chapter shows the results of calculating the projected likely misstatement using the difference method. Assume the results shown in Exhibit EP 10-5 were obtained from a stratified sample.

Required:

Apply the ratio calculation method to each stratum to calculate the projected likely misstatement (PLM). What is PLM for the entire sample?

Transcribed Image Text:

EXHIBIT EP10-5 SAMPLE RESULTS POPULATION RECORDED SIZE RECORDED MISSTATEMENT AMOUNT STRATUM AMOUNT SAMPLE AMOUNT $100,000 75,068 1 6 6 $100,000 $ -600 2 80 23 21,700 -274 168 75,008 75,412 22 9,476 4,692 1,973 -66 342 22 -88 74,512 $400,000 910 23 23 1,506 96 $137,841 $-1,005 "A negative misstatement indicates overstatement of the book value, and a positive misstatement indicates understatement.