CA Inter P5 · Chapter 4 · Question 10 of 14
Using monetary unit sampling on trade receivables of Rs. 6 crore, the auditor selects 120 items using a fixed sampling interval. One selected balance with a book value of Rs. 2,00,000 has an audited value of Rs. 1,50,000. What is the projected misstatement for this sampling interval?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Rs. 1,25,000
Explanation
Sampling interval = Rs. 6,00,00,000 / 120 = Rs. 5,00,000. Misstatement = Rs. 2,00,000 - Rs. 1,50,000 = Rs. 50,000, so tainting = 50,000 / 2,00,000 = 25%. Because the item is smaller than the interval, projected misstatement = 25% x Rs. 5,00,000 = Rs. 1,25,000. Rs. 50,000 is only the actual misstatement, which SA 530 requires to be projected.
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