Population
- $\quad$ Size $= 10,000$ items
- Book value $= \$ 8,000,000$
- Tolerable misstatement $= \$ 300,000$
Sample
- $\quad$ Size $= 100$ items.
- Average book value of sample items $= \$ 795$
- Allowance for sampling risk $= \$ 220,000$
- Projected misstatement $= \$ 100,000$ overstatement
-The average audited value in the sample is equal to:
A)$785.
B)$805.
C)$1,000.
D)$1,200.

Question

Quizplus · Accepted Answer

The average audited value in the sample can be calculated by subtracting the projected misstatement per item from the average book value of sample items. The projected misstatement for the entire sample is $100,000, and the sample size is 100 items, so the projected misstatement per item is $1,000. The average book value of sample items is $795, so the average audited value is $795 - ($100,000 / 100) = $795 - $1,000 = -$205. However, this calculation seems incorrect based on the given options and the nature of the question. The correct approach is to understand that the projected misstatement is an overall overstatement, which means the actual value is less than the book value. Given the average book value of sample items is $795 and the projected misstatement for the sample is $100,000, we need to correct the calculation to reflect the relationship between book value, audited value, and misstatement correctly.The correct calculation should consider how the projected misstatement affects the relationship between the book value and the audited value, typically involving adjusting the total book value of the sample or understanding the misstatement in terms of its impact on the average value per item. Without additional specific details on how the misstatement is calculated or applied to individual items, the direct calculation provided does not lead to a correct answer based on the options given. The misunderstanding in the initial explanation points to a need for clarification or reevaluation of the calculation method used to find the average audited value.

Population - \quad Size =10,000= 10,000=10,000 Items - Book Value =$8,000,000= \$ 8,000,000=$8,000,000

Population
- $\quad$ Size $= 10,000$ Items
- Book Value $= \$ 8,000,000$