Auditing Project
Greta Garbo, CPA was conducting the audit of Deborah Kerr, Inc. for the year ended December 31, 2020. Greta plans to use monetary unit sampling (MUS) to audit Deborah Kerr's accounts receivable account. The balance of accounts receivable at December 31, 2020 was $9,500,000. Required: a. Based on the following information, compute the required MUS sample size and the sampling interval. Use the tables provided and show all_of your work. Round calculations to the nearest dollar. Tolerable misstatement = $475,000 Expected misstatement = $95,000 Risk of incorrect acceptance = 10% b. Greta used the sample items selected in part (a) and performed the audit procedures listed in the accounts receivable program. She found the following misstatements: Account Book Value Audit Value Tainting Factor Rank Marlon Brando 12,500 8,500 Humphry Bogart 75,900 45,540 Audrey Hepburn 88,000 77,440 Katharine Hepburn 123,900 107,793 Bette Davis 75,250 81,270 Marilyn Monroe 65,800 49,350 Richard Burton 147,100 102,970 Elizabeth Taylor 42,900 39,468 Ingrid Bergman 65,175 0 Cary Grant 29,600 27,824 Using this information and the sampling tables provided, complete the tables above and on the top of the next page. Show all of your calculations. Round your calculations of the sampling interval, the projected misstatement and the upper misstatement limit to the nearest dollar. Account Tainting Sampling Projected Upper Limit Upper Factor Interval Misstatement Increment Misstatement Basic Precision Upper Misstatement Limit Effects of Understatements Account Tainting Factor Sampling Interval Projected Misstatement Net Upper Misstatement Limit = Should Greta conclude that Deborah Kerr's accounts receivable is materially misstated or not? Why?Statistical Sample Results Evaluation Table for Attribute Sampling - 95 Percent Desired Confidence Level Actual Number of Deviations Found Sample Size 0 1 2 3 4 5 8 10 25 11.3 17.0 30 0.5 14.0 19.6 35 8.3 12.0 17.0 40 71 11.4 15.0 18.3 45 8.5 10.2 13.4 10.4 19.2 50 5.9 9.2 12.1 14.8 17.4 19.0 55 5.4 8.4 11.1 13.5 15.9 18.2 60 4.9 7.7 10.2 12 5 14.7 16.8 18.8 4.8 7.1 9.4 11.5 13.0 15.5 17.4 19.3 70 4.2 8.8 10.8 12.0 14.5 10.3 18.0 10.7 75 4.0 8.2 8.2 10.1 11.8 13.0 15.2 18.0 18.5 20.0 80 3.7 5.8 7.7 9.5 11.1 12.7 14.3 15.9 17.4 18.0 3.3 5.2 8.9 8.4 9.0 11.4 12.8 14.2 15.5 16.8 18.2 100 3.0 4.7 6.2 7.8 9.0 10.3 11.5 12.8 140 15.2 16.4 125 2.4 3.8 5.0 8.1 7.2 8.3 9.3 10.3 11.3 12.3 13.2 150 2.0 3.2 4.2 5.1 6.0 7.8 8.0 9.5 10.3 11.1 200 1.5 24 3.2 3.9 4 8 5.2 5.0 85 72 0.8 8.4 Statistical Sample Results Evaluation Table for Attribute Sampling - 50 Percent Desired Confidence Level Actual Number of Deviations Found mple Size 0 1 2 3 4 7 8 10 10.0 18.1 8.8 14.7 10.9 7.4 12.4 16.8 6.4 10.7 14.5 18.1 5.6 9.4 128 16.0 19.0 5.0 B.4 11.4 14.3 17.0 19.7 88888486808 4.0 7.8 10.3 12.9 15.4 17.8 4.1 8.9 9.4 11.8 14.1 18.3 18.4 3.8 8.4 8.7 10.8 12.9 15.0 10.9 18.9 3.3 5.5 7.5 9.3 11.1 12.0 14.0 18.3 17.9 19.0 2.0 8.8 8.2 9.8 11.3 12.3 14.3 15.8 17.2 18.6 2.0 5.9 7.3 8.7 10.1 11.5 12.8 14.1 15.4 10.6 2.3 5.3 6.6 7.0 9.1 10.3 11.5 12.7 13.9 15.0 120 20 3.3 4.4 5.5 8.0 7.6 5.7 9.7 10.7 11.8 12.0 160 1.5 25 3.3 12 5.0 5.8 6.5 7.3 8.0 8.8 9.5 200 12 20 27 5.3 5.9 8.5 7.1 7.6Statistical Sample Sizes for Attribute Sampling - 95 Percent Confidence Level Expected Population Tolerable Deviation Rate 10%% 15% 20% Deviation Rate 3% 4% 59% 6% 8% 9% 140 09 50 49 0.00%% 74 32 230 157 117 03 0.25 0.50 157 117 93 78 D.75 208 117 03 78 158 03 78 1.00 158 124 78 82828888885 1 25 192 124 103 1.50 227 103 1.75 127 2.00 208 8868685888588585885 2.25 2.50 173 109 2.75 105 129 3.00 148 3.25 187 3.50 185 3.75 4.00 5.00 8.00 7.00 Statistical Sample Sizes for Attribute Sampling - 90 Percent Confidence Level Expected Population Tolerable Deviation Rate 8% 10%% 15% 20% Deviation 5% 6% 7% Rate 22 11 0.00% 144 76 57 18 18 0.25 194 129 06 0.50 104 129 08 18 0.75 265 129 18 1.00 176 08 18 1.25 221 132 1.50 385838882822298 283 1.75 2.00 2 25 2.50 2.75 3.00 3.25 3.50 3.75 4.00 5.00 8.00 7.00
