Q: What mistakes do candidates make on this CPA question?

Using the actual error ($2,000) without projecting it to the interval.

Question 1

An auditor uses probability-proportional-to-size (PPS) sampling to select a sample of accounts receivable for confirmation. A customer account with a recorded balance of $10,000 was selected. The audit value was determined to be $8,000. The sampling interval is $50,000. What is the projected misstatement for this item?

Accepted Answer

PPS Logic: 1. Calculate Tainting % (Error / Book Value). 2. Multiply Tainting % by Sampling Interval. (Note: If Book Value > Interval, the actual error is used, no projection). Here, 10k < 50k, so project.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using the actual error ($2,000) without projecting it to the interval.

How to approach this question

Full Answer

Common mistakes

Practice the full CPA AUD Practice Exam 2

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