Question
Evaluating a PPS sample Assume the following misstatements were found in a PPS sample: Sample Item Book Value Audit Value 1$650$585 25400 31,9000 42,2001,650 52,8002,660
Evaluating a PPS sample Assume the following misstatements were found in a PPS sample:
Sample Item Book Value Audit Value
1 $ 650 $ 585
2 540 0
3 1,900 0
4 2,200 1,650
5 2,800 2,660
a. Calculate the projected misstatement assuming:
- The sampling interval was $1,800.
- The sampling interval was $ 2,000.
b. If a risk of incorrect acceptance of 15% is specified in the sample design, the sampling interval is $2,000, and five misstatements are found as enumerated above, calculate:
- Basic precision.
- The incremental allowance for sampling risk.
- The upper misstatement limit.
c. If tolerable misstatement were $50,000 and expected misstatement were $10,000, what conclusion would you reach based on your results in (b)?
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