Page 123 - AA Integrated Workbook STUDENT 2018-19
P. 123
Evidence
Example 6
Evaluating misstatements
You have been auditing receivables with a balance of $200,000.
A sample of $5,000 was tested and an error of $20 was found.
When deciding what action to take regarding this error, the auditor cannot just
look at the value of $20, they must consider the effect of the error across the
population.
The error rate here is: (20/5,000) = 0.4%
The auditor should extrapolate this error rate across the population:
200,000 × 0.4% = $800
It is this figure that should be considered to determine if more testing is needed.
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