Assume that your audit team has established the following parameters for the examination of ELM's sales transactions:

Risk of incorrect acceptance .................................................................... 10%

Tolerable misstatement ... $292,229 (or 7.5% of the recorded balance of the transactions

Expected misstatement ...... $38,964 (or 1% of the recorded balance of the transactions)

Based on these parameters and a random start of 9,876, your audit team determined a sample size of 38 items and a corresponding sampling interval of $102,536.42.

The IDEA files for items selected by your audit team are included as Monetary Sample

G.67 and High Values G.67 in Connect.

Students should begin a new project for each part of this exercise and copy the IDEA files into the folder related to that project, as IDEA automatically overwrites the file being used with the audited value.

Required:

a. After receiving replies to confirmations, you noted the following discrepancies:

Order No. _________ Recorded Balance __________ Audited Value

17025 ...................... $89,039.21 .................... $88,126.24

17302 ....................... $16,617.54 ................... $15,500.00

17020 ...................... $144,515.21 ................. $140,967.20

Use IDEA to calculate the upper limit on misstatements. What would your conclusion be with respect to the recorded balance of ELM's sales transactions?

b. [Note: Part (b) is independent of part (a)] After receiving replies to confirmations, you noted the following discrepancies:

Order No. ___________ Recorded Balance __________ Audited Value

17050 .......................... $23,239.34 .................... $20,000.00

17215 .......................... $79,231.54 ................... $71,308.39

17260 ........................... $7,001.52 ..................... $5,000.00

17190 .......................... $151,469.58 ................. $145,000.00

Use IDEA to calculate the upper limit on misstatements. What would your conclusion be with respect to the recorded balance of ELM's sales transactions?