In the audit of price seed company for the year ended

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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%. 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:

A. Calculate the upper and lower misstatement bounds 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.

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 9/26; company received check 10/3.

3.

$ 3,890.00

$ 1,190.00

Merchandise returned 9/30 and counted in inventory; credit was issued 10/6.

4.

$  791.00

$   815.00

Footing error on an invoice.

5.

$   548.00

$ 1,037.00

Goods were shipped 9/28; sale was recorded on 10/6.

6.

$ 3,115.00

$ 3,190.00

Pricing error on a credit memorandum.

7.

$ 1,540.00

      -0-

Goods were shipped on 9/29; customer received goods 10/3; sale was recorded on 9/30.

Reference no: EM13588225

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