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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence

In a substantive test of inventory, the auditor of Brelland Ltd finds that one sampled item was overstated by 4,000 because a count sheet was added up incorrectly. The sampled items total 200,000 of a population of 2,000,000. Management says the error is a one-off. Assuming the auditor has no evidence that the error is an anomaly, what is the projected misstatement?

The projected misstatement is 40,000. The sample covers one tenth of the population by value, so the 4,000 error is multiplied by ten. Management's assertion that the error is isolated does not make it an anomaly without high certainty, so extrapolation to the population is required.

  1. A4,000
  2. B40,000Correct
  3. C400,000
  4. D8,000

Explanation

Projected misstatement = error found × (population / sample) = 4,000 × (2,000,000 / 200,000) = 4,000 × 10 = 40,000. Option 0 fails to extrapolate. Management's claim is not enough to treat it as an anomaly, as ISA 530 requires the auditor to have a high degree of certainty before doing so.

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