QUESTION 6

You are testing the sales account of Kappa Ltd for possible material misstatement. Listed below are the initial 20 items from the population of sales invoices:

Invoice No.	Amount ($)		Invoice No.	Amount ($)
1	4,048		11	17,836
2	1,690		12	20,998
3	9,706		13	13,167
4	5,669		14	1,771
5	2,093		15	2,301
6	2,242		16	37,318
7	2,645		17	50,853
8	7,521		18	1,897
9	27,358		19	14,375
10	977		20	4,347

The total of the sales account is $4,500,000, consisting of 300 items. A sample of 50 items is to be selected with a random start of 3.

The tolerable error is set at $500,000.

Required:

1. Using traditional systematic sampling, which sales invoices will be the first 3 included in the sample? Show all calculations.
2. Using Dollar Unit Sampling (DUS) with selection by a systematic sampling technique, which sales invoices will be the first 3 included in the sample? Show all calculations.
3. If the total amount for the samples is $800,000 and the misstatement found in the samples is $100,000, explain whether the sales account is materially misstated. Show all calculations.
4. What possible courses of action can you take for your results in part (c)?
5. Identify two (2) other accounts in the clients Statement of Financial Position where you would use DUS. Explain your answer.