Auditing & Assurance Services 6th Edition by Timothy Louwers

Exercise 594

Upper Limit on Misstatements Calculation: Monetary Unit Sampling. Jordan Thomas is using MUS to examine a client's accounts receivable balance. Using a sample size of 100 items and a sampling interval of $12,300, Thomas identified the following misstatements:

Required:
a. Calculate the upper limit on misstatements assuming a risk of incorrect acceptance of (1) 5 percent and (2) 10 percent.
b. Based on your calculations in (a), comment on the relationship between the risk of incorrect acceptance and the upper limit on misstatements.