A component of an account balance has a recorded balance of $10,000 and an audited balance of $8,000.Using MUS,if the sampling interval is $20,000,the projected misstatement would be
A) $2,000.
B) $4,000.
C) $5,000.
D) $10,000.

Question

Quizplus · Accepted Answer

MUS (Monetary Unit Sampling) is based on the assumption that errors occur randomly within a population, and not just in specific high-risk areas. The projected misstatement can be calculated as the sampling interval (SI) multiplied by the misstatement rate (MR).

Here, the book balance is $10,000 and the audited balance is $8,000, indicating a misstatement of $2,000. The misstatement rate is calculated as the misstatement divided by the book balance, which is $2,000/$10,000 = 0.2.

The sampling interval is given as $20,000.

So, the projected misstatement would be $20,000 x 0.2 = $4,000.

Therefore, the correct answer is B.

A Component of an Account Balance Has a Recorded Balance