A Case Study On Lowell, Inc.
I agree with you that it is not appropriate for Avis to substitute another store for Mo’s store with whom she …show more content…
And AS 2315: Audit Sampling (AU Section 350.26 reorganized) of the PCAOB, in paragraph 26, notes “The auditor should project the misstatement results of the sample to the items from which the sample was selected. There are several acceptable ways to project misstatements from a sample”. Avis could have performed the following method as explained in the standard:
“For example, an auditor may have selected a sample of every twentieth item (50 items) from a population containing one thousand items. If he discovered overstatements of $3,000 in that sample, the auditor could project a $60,000 overstatement by dividing the amount of misstatement in the sample by the fraction of total items from the population included in the sample. The auditor should add that projection to the misstatements discovered in any items examined 100 percent. This total projected misstatement should be compared with the tolerable misstatement for the account balance or class of transactions, and appropriate consideration should be given to sampling risk. If the total projected misstatement is less than tolerable misstatement for the account balance or “class of transactions, the auditor should consider the risk that such a result might be obtained even though the true monetary misstatement for the population exceeds tolerable misstatement (PCAOB,