Assume a mean-per-unit estimation variables sampling application with a tolerable misstatement of $70,000 and a book value of $700,000.After performing the sampling plan,the auditors calculated an allowance for sampling risk of $45,000 and a point estimate of the population's total audited value to be $640,000.The projected misstatement based on this sample is:
A)$5,000
B)$45,000
C)$60,000
D)$70,000

Question

Quizplus · Accepted Answer

To calculate the projected misstatement, we use the formula:

(Projected misstatement) = (Tolerable misstatement) - (Allowance for sampling risk) - (Point estimate)

Substituting the given values, we get:

(Projected misstatement) = $70,000 - $45,000 - $640,000 = -$615,000

This means that the audited value is actually lower than the book value by $615,000. However, since this is not a possible scenario, we use the absolute value of this number:

(Projected misstatement) = $|-$615,000| = $615,000

Therefore, the projected misstatement based on this sample is $60,000 (since it is less than the tolerable misstatement of $70,000). The correct answer is choice C.

Assume a Mean-Per-Unit Estimation Variables Sampling Application with a Tolerable