ACCA AA · Chapter 10 · Question 3 of 10
The auditor tests a sample of receivable balances with a total book value of $400,000 from a population of $4,800,000. The sample contains misstatements totalling $7,200 (overstatements). Using the ratio method, what is the projected misstatement for the population?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $86,400
Explanation
Misstatement rate = $7,200 / $400,000 = 1.8%. Projected misstatement = 1.8% x $4,800,000 = $86,400 (equivalently $7,200 x 12). $7,200 ignores projection, $72,000 multiplies by 10 rather than 12, and $93,600 double-counts the known misstatement on top of the projection.
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