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Presentation Outline
I.
Misstatement conditions
are any conditions that
represent a monetary
misstatement in a sample
item.
RECORDED
ITEM
VALUE
AUDITED
ITEM
VALUE
MISSTATEMENT
2073
6,200
6,100
100
5111
12,910
12,000
910
5206
4,322
4,450
(128)
7642
23,000
22,995
9816
8,947
2,947
6,000
RECORDED
ITEM
VALUE
AUDITED
ITEM
VALUE
MISSTATEMENT
MISSTATEMENT /
RECORDED
ITEM VALUE
2073
6,200
6,100
100
.016
5111
12,910
12,000
910
.07
5206
4,322
4,450
(128)
(.03)
7642
23,000
22,995
.0002
9816
8,947
2,947
6,000
.671
RECORDED
POPULATION
VALUE
MISSTATEMENT
PERCENTAGE
ASSUMPTION
1,200,000
1.0 *
1,200,000
.671
1,200,000
.07
1,200,000
.016
1,200,000
.0002
UNDERSTATEMENTS
RECORDED
POPULATION
VALUE
MISSTATEMENT
PERCENTAGE
ASSUMPTION
1,200,000
1.0 *
1,200,000
.03
RECORDED
POPULATION
VALUE
MISSTATEMENT
PERCENTAGE
ASSUMPTION
UPPER
PRECISION
LIMIT
PORTION*
1,200,000
1.0
.030
1,200,000
.671
.017
1,200,000
.07
.015
1,200,000
.016
.014
1,200,000
.0002
.014
UNDERSTATEMENTS
RECORDED
POPULATION
VALUE
MISSTATEMENT
PERCENTAGE
ASSUMPTION
UPPER
PRECISION
LIMIT
PORTION*
1,200,000
1.0
.030
1,200,000
.03
.017
RECORDED
POPULATION
VALUE
MISSTATEMENT
PERCENTAGE
ASSUMPTION
UPPER
PRECISION
LIMIT
PORTION
MISSTATEMENT
BOUND
1,200,000
1.0
.030
36,000
1,200,000
.671
.017
13,688
1,200,000
.07
.015
1,260
1,200,000
.016
.014
269
1,200,000
.0002
.014
Totals
.090
51,220
UNDERSTATEMENTS
RECORDED
POPULATION
VALUE
MISSTATEMENT
PERCENTAGE
ASSUMPTION
UPPER
PRECISION
LIMIT
PORTION
MISSTATEMENT
BOUND
1,200,000
1.0
.030
36,000
1,200,000
.03
.017
612
.047
36,612
Totals
X
Sample Size
Recorded
Population
Value
Point
Estimate
X 1,200,000
9,086
360
100
Understatement Point Estimate:
.03
100
X 1,200,000
36,612
(9,086)
27,526
51,220
(360)
50,860
Tolerable misstatement
($40,000)
$40,000
Reject
($27,526)
($50,860)
LMB
UMB
Offsetting
misstatements in
other parts of the
audit may make a
balance acceptable.
The audit
process
must have
some teeth
in it!
Summary
Steps of Audit Sampling for Tests of Details
of Balances
The Statistical Technique of Monetary Unit
Sampling
The Rejection of a Population
ARACR and ARIA