You Are Planning to Use Monetary Unit Sampling to Evaluate

question 22

Essay

You are planning to use monetary unit sampling to evaluate accounts receivable for Violet Company.The accounts receivable account totals $3,000,000.You have assessed a risk of incorrect acceptance of 5 percent,a tolerable misstatement of $120,000,and an expected misstatement of $24,000.
a.Calculate the sample size and sampling interval.
b.Regardless of your answer to (a),use a sample size of 125 and the related sampling interval and calculate the upper limit on misstatements assuming you found the following differences.

$\begin{array}{l}\begin{array} { l } \text { Account } & \text { Recorded Balance } \\102& 2,000\\235 & 3,200\end{array}\begin{array} { l } \text { Audited Value } & \text { Difference } \\\$600& \$1,400\\1,920& 1,280\end{array}\end{array}$

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Definitions:

Legal Entities

Organizations or structures that are recognized by law as having rights and responsibilities, such as corporations, partnerships, and sole proprietorships.

Economic Entities

Organizations or units that engage in economic activities, recognized as separate from their owners.

Wholly Owned Subsidiaries

Companies whose entire share capital is 100% owned by another company, the parent company.

Revenue from Investment

Income earned from investing in financial assets or other assets, including interests, dividends, or capital gains.