Upper Misstatement Limit When evaluating the MUS sample results, the auditor calculates the total estimated misstatement in the account balance based on the sampling process. Describe the four components that make up this total
The total estimated misstatement is computed by adding together three components:
Factual misstatement for items in the top-stratum.
Basic Precision - The amount of uncertainty associated with testing only a part of the population (sampling error). It is equal to the UML if no errors are found in the sample.
Most Likely Misstatement (MLM) - The best estimate of the actual amount of dollar misstatements that exist in the account balance. This is also called projected misstatement.
Incremental Allowance for Sampling Error - An increase in the upper misstatement estimate caused by the statistical properties of misstatements found.
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