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Carson Allister is performing an MUS application in the audit of Bird Company's accounts receivable. Based on the acceptable level of the risk of incorrect
Carson Allister is performing an MUS application in the audit of Bird Company's accounts receivable. Based on the acceptable level of the risk of incorrect acceptance of 5 percent and a tolerable misstatement of $120,000, Allister has calculated a sample size of 75 items and a sampling interval of $25,000. After examining the sample items, the following misstatements were identified: (Use Exhibit FA2) Iten Recorded Balance Audited Value $35,000 $28,000 2 10,000 8,000 3 6,000 3,000 Required: a. Calculate the upper limit on misstatements for Bird Company's accounts receivable. Upper limit on misstatements $ 108,000 b. Fill in the appropriate blanks to provide a brief description of the meaning of the upper limit on misstatements calculated in part (a). percent probability that the true amount of minutatement in the account balononls than or equal to exists. Conversely, a percent probability (risk of incorrect acceptance) that the the amount of the misstatement in the account balance in than exists c. What would Allister's conclusion be with respect to the fairness of Bird's accounts receivable balance? less than the tolerable misstatement, Allister would conclude that Bird's accounts receivable are Because the upper limit on misstatements is not fairly stated
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