Question 1

An auditor is calculating the sample size for a test of details of balances using probability-proportional-to-size (PPS) sampling. The recorded amount of the population is $1,000,000. The auditor determines a reliability factor of 3.0 (based on risk of incorrect acceptance), a tolerable misstatement of $50,000, and an expected misstatement of $10,000. The expansion factor is 1.6. What is the sampling interval?

Accepted Answer

Recall PPS formulas. 1. Calculate Sample Size: (Book Value * Reliability Factor) / (Tolerable Misstatement - (Expected Misstatement * Expansion Factor)). 2. Calculate Interval: Book Value / Sample Size.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Forgetting to reduce Tolerable Misstatement by the expected misstatement portion in the denominator.

How to approach this question

Full Answer

Common mistakes

Practice the full CPA AUD Practice Exam 3

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