Question

In a probability-proportional-to-size sample with a sampling interval of $10,000, an auditor discovered that a selected account receivable with a recorded amount of $5,000 had an audited amount of $4,000. If this were the only misstatement discovered by the auditor, the projected misstatement of this sample would be:

A. $1,000.

B. $2,000.

C. $5,000.

D. $10,000.

Answer 1

For the described probability-proportional-to-size sample, the misstatement within the current sample is $1,000. To project the misstatement over the entire population, additional data would be required.

Step-by-step explanation:

In a probability-proportional-to-size sample where the sampling interval is $10,000, and there is a misstatement discovered in a selected account receivable which has been recorded at $5,000 but has an audited amount of $4,000, the projected misstatement would be calculated as the misstatement amount relative to the sampling interval. In this case, the misstatement is $1,000 ($5,000 - $4,000), but to project this to the entire population, we would need to account for the size of the interval.

However, provided information is not sufficient to unequivocally project the misstatement over the entire population as we would need additional data about the size of the population or the number of intervals. Responding directly to the question, within the current sample, the misstatement is $1,000.