In the audit of Price Seed Company for the year ended September 30, the auditor set a tolerable misstatement of $50,000 at an ARIA of 10 percent. A PPS sample of 100 was selected from an accounts receivable population that had a recorded balance of
$1,975,000. The following table shows the differences uncovered in the confirmation process:
Required
Required
Chapter 17 / AUDIT SAMPLING FOR TESTS OF DETAILS OF BALANCES 611
Accounts
Receivable
per Records
Accounts
Receivable
per Confirmation Follow-Up Comments by Auditor
1. $2,728.00 $2,498.00 Pricing error on two invoices.
2. $5,125.00 -0- Customer mailed check September 26; company
received check October 3.
3. $3,890.00 $1,190.00 Merchandise returned September 30 and counted in
inventory; credit was issued October 6.
4. $ 815.00 $ 785.00 Footing error on an invoice.
5. $ 548.00 -0- Goods were shipped September 28; customer re-
ceived goods on October 2; sale was recorded on
September 28.
6. $3,215.00 $3,190.00 Pricing error on a credit memorandum.
7. $1,540.00 -0- Goods were shipped on September 29; customer
received goods October 3; sale was recorded on
September 30.
a. Calculate the upper misstatement bound on the basis of the client misstatements in
the sample.
b. Is the population acceptable as stated? If not, what options are available to the auditor at this point? Which option should the auditor select? Explain.