Question
The following decisions about the audit of inventory for ABC Inc. have been determined by the partner-in-charge: Total recorded value $1,200,000 Materiality $100,000 Sample size
The following decisions about the audit of inventory for ABC Inc. have been determined by the partner-in-charge:
Total recorded value | $1,200,000 |
Materiality | $100,000 |
Sample size | 60 |
Average percent of error assumption - overstatements | 50% |
Average percent of error assumption - understatements | 50% |
Acceptable risk of incorrect acceptance | 10% |
Required: Calculate the initial overstatement and understatement bounds. Use three decimal places.
Overstatements | |||||||
Number of Misstatements
| Upper Precision Limit | Total Upper Precision Limit | Recorded Value | Misstatement Unit Error Assumption | Bound Portion | ||
0 | Blank 1. Fill in the blank, read surrounding text. | Blank 2. Fill in the blank, read surrounding text. | 1,200,000 | Blank 3. Fill in the blank, read surrounding text. | Blank 4. Fill in the blank, read surrounding text. | ||
1 | Blank 5. Fill in the blank, read surrounding text. | Blank 6. Fill in the blank, read surrounding text. | 1,200,000 | Blank 7. Fill in the blank, read surrounding text. | Blank 8. Fill in the blank, read surrounding text. | ||
2 | Blank 9. Fill in the blank, read surrounding text. | Blank 10. Fill in the blank, read surrounding text. | 1,200,000 | Blank 11. Fill in the blank, read surrounding text. | Blank 12. Fill in the blank, read surrounding text. | ||
3 | Blank 13. Fill in the blank, read surrounding text. | Blank 14. Fill in the blank, read surrounding text. | 1,200,000 | Blank 15. Fill in the blank, read surrounding text. | Blank 16. Fill in the blank, read surrounding text. | ||
Initial overstatement bound |
| Blank 17. Fill in the blank, read surrounding text. | |||||
| |||||||
Understatements | |||||||
0 | Blank 18. Fill in the blank, read surrounding text. | Blank 19. Fill in the blank, read surrounding text. | 1,200,000 | Blank 20. Fill in the blank, read surrounding text. | Blank 21. Fill in the blank, read surrounding text. | ||
1 | Blank 22. Fill in the blank, read surrounding text. | Blank 23. Fill in the blank, read surrounding text. | 1,200,000 | Blank 24. Fill in the blank, read surrounding text. | Blank 25. Fill in the blank, read surrounding text. | ||
2 | Blank 26. Fill in the blank, read surrounding text. | Blank 27. Fill in the blank, read surrounding text. | 1,200,000 | Blank 28. Fill in the blank, read surrounding text. | Blank 29. Fill in the blank, read surrounding text. | ||
Initial understatement bound |
| Blank 30. Fill in the blank, read surrounding text. |
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