Advanced Accounting

Likely Aggregate Misstatement / Projected Likely Misstatement You work for the audit firm of Teper and Lubetsky, Auditors. You are auditing the Vynnyk Canada Inc. company for their recently completed fiscal year. In examining their Accounts Receivable, you are attempting to use Audit Sampling to project a Likely Aggregate Misstatement ("LAM") for the balance for Accounts Receivable in Vynnyk Canada management's draft financial statements. Note, consider LAM to be the same as Projected Likely Misstatement ("PLM"). The Accounts Receivable sub-ledger balances to the Accounts Receivable Control Account, so that is not an issue for you. In your investigation, you have found the following: All Accounts Receivable: 4,000: total number of customer accounts. $3,250,000: total dollar value of Accounts Receivable recorded in Vynnyk Canada Inc.'s accounting system. In the Sample of the Accounts Receivable: 150: total number of customer accounts sampled. $125,000: total dollar value of those sampled customer accounts recorded in Vynnyk Canada Inc.'s accounting system. $3,000: total dollar value of the misstatements found in the sample. It has been decided that the materiality for Accounts Receivable is $125,000. $3,000: total dollar value of the misstatements found in the sample. It has been decided that the materiality for Accounts Receivable is $125,000. REQUIRED: [A] Calculate the Likely Aggregate Misstatement using the RATIO Method (students must show calculations in their written responses). [B] Calculate the Likely Aggregate Misstatement using the DIFFERENCE Method (students must show calculations in their written responses). [C] Do you think there is a MATERIAL misstatement in Vynnyk Canada Inc.'s Accounts Receivable balance and EXPLAIN why or why not with reference to both Methods of calculating a Likely Aggregate Misstatement. ("yes" or "no" answers without explanation are insufficient). STUDENT RESPONSE BELOW