Hill has decided to use probability-proportional-to-size (PPS) sampling, sometimes called dollar-unit sampling, in the audit of a client’s accounts receivable balances. Hill plans to use the following PPS sampling table:
TABLE
Reliability Factors for Overstatements
Additional information
|
Tolerable misstatements |
|
|
(net of effect of expected misstatements) |
$ 24,000 |
|
Risk of incorrect acceptance |
20% |
|
Number of misstatements |
1 |
|
Recorded amount of accounts receivable |
$240,000 |
|
Number of accounts |
360 |
In a probability-proportional-to-size sample with a sampling interval of $5,000, an auditor discovered that a selected account receivable with a recorded amount of $10,000 had an audit amount of $8,000. If this were the only error discovered by the auditor, the projected error of this sample would be
a. $1,000
b. $2,000
c. $4,000
d. $5,000