I understand how to use PPS Sampling as shown in the Becker review (2012 A5-19, for convenience), but wanted to see if anyone could shed some additional light. I don't think this will be a problem if PPS Sampling shows up on the exam though.
A) Account Book Value: $8,500
B) Audit Amount: $6,900
Sample Interval = $5,000
Given the above there is a $1,600 dollar error and because "the account selected has a balance greater than the interval, the actual dollar amount of the error should be used." Therefore, the $1,600 is used as one of the Projected Errors and evaluated with any other exceptions found.
Question 1: The rule is to use the actual error when "the account selected has a balance greater than the interval". Per the above is that the Book Value of $8,500 initially observed by the auditor or the True Account Value as Audited at $6,900, which must exceed the interval to use the actual error?
How are these scenarios treated:
A) $5,000 interval, Book Value $8,500, True Account Value as Audited $4,800
B) $5,000 interval, Book Value $4,900, True Account Value as Audited $6,400
If that is confusing I can try to explain my question better.