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Describe the risks associated with sampling methods

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Question - Jack and Jill, PAs audited the accounts receivable of DTB Inc. on a sample basis. There were 2,000 customer accounts in the subsidiary ledger with a total recorded value of $450,000. As part of the audit program, Jack and Jill selected a sample of 100 accounts having a recorded value of $25,000. They performed the audit procedures and determined that the audited amount of the sample totaled $24,000.

A) Calculate the projected likely misstatement (PLM) using: (1) the average difference method and (2) the ratio method.

B) Evaluate the results of the calculation in part (A). Assume that Jack and Jill set the tolerable misstatement for accounts receivable at $28,000.

C) Describe the risks associated with sampling methods and whether they can be prevented by an audit firm.

Reference no: EM133010234

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