Left and Right PAs Audited the Accounts Receivable of Investo

question 44

Essay

Left and Right PAs audited the accounts receivable of Investo Limited on a sample basis. There were 2,000 customer accounts in the subsidiary ledger with a total recorded value of $375,000. As part of the audit program, Left and Right selected a sample of 100 accounts having a recorded value of $20,000. They performed the audit procedures and determined that the audited amount of the sample totalled $19,000.
Required:
A) Calculate the projected likely misstatement (PLM) using (1) the average difference method and (2) the ratio method.
B) Evaluate the results of the calculation in part (A). Assume that Left and Right set the tolerable misstatement for accounts receivable at $25,000.

• A) Calculate the projected likely misstatement (PLM) using (1) the average difference method and (2) the ratio method.
• B) Evaluate the results of the calculation in part (A). Assume that Left and Right set the tolerable misstatement for accounts receivable at $25,000.

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