Your Uncle Bob, a CPA, Has Recently Started Auditing and He

question 23

Essay

Your uncle Bob, a CPA, has recently started auditing and he wants your advice on some tests of sales transactions he is conducting. Bob selected a haphazard sample of 15 sales with a total book value of $75,000. In his sample, he found a total of $500 in net overstatement errors. The total sales balance per book is $10,000,000. Overall materiality for the engagement is $300,000. Tolerable misstatement for sales is $70,000. If the sample results indicate that Bob's best estimate of total misstatement in sales is $35,000, can Bob safely conclude that no additional work is needed in this area? Include in your answer a clear discussion of how sample results are compared to tolerable misstatement.

---

Definitions:

White-Collar

White-Collar refers to jobs or workers that are in professional, managerial, or administrative roles, typically involving mental or clerical work as opposed to physical labor.

Billions

A numerical value equivalent to a thousand million (1,000,000,000), often used to denote large quantities, such as currency or populations.

Code of the Street

A set of informal rules governing interpersonal public behavior, including violence, in urban environments, often as a means of maintaining respect and dissuading aggression.

Mainstream Corporations

Mainstream corporations are large companies that operate in the central or most accepted sector of the economy, often characterized by their broad consumer base and substantial market influence.