Auditing & Assurance Services 6th Edition by Timothy Louwers

Exercise 108

Upper Limit on Misstatements Calculations: Monetary Unit Sampling. Assume that Parker Fran has calculated a sampling interval for Tide Inc.'s inventory of $10,000 and has conducted an examination of a sample of inventory balances. Fran has identified the following three misstatements:

Required:
Calculate the upper limit on misstatements for the following levels of the risk of incorrect acceptance. In general, what relationship do you observe between the risk of incorrect acceptance and the upper limit on misstatements?
a. 5 percent.
b. 10 percent.