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Shivang Aggarwalshivang Aggarwal asked 1 year ago

Sir what is difference between Expected misstatements and Projected misstatements….in special case of evaluation of sampling results…
Book text -“Also, if the projected misstatement is greater than the auditor’s expectations of misstatement used to determine the sample size, the auditor may conclude that there is an unacceptable sampling risk that the actual misstatement in the population exceeds the tolerable misstatement.”
Acc to me Expected misstatements is Population me kitni galti ho sakti hai ?
And Projected misstatements is sample me itni galti so population me kitni ?
So what is difference between the two?

1 Answers
RaviRavi Staff answered 1 year ago

Expected misstatement is computed just before performing sampling process on financial item, we take into account past experience, current circumstances and all relevant information and predict what can be level of misstatement in population.
Projected misstatement is computed after evaluating sample during sampling process, we take into consideration results of sample also along with other factors and on that basis predict misstatements in population.
So we can say expected misstatement is our opinion about car before taking test drive and projected misstatement is our opinion after taking test drive.
So question is why we compute expected misstatement when we are going to get projected misstatement which is better estimate than expected misstatement, it is because if expected misstatement is very high crossing tolerable limits, we would directly go for 100% checking than sampling.
Expected levels are computed so that we can decide whether to go for sampling or 100% checking in test of details and in test of controls they help us to decide whether it will be worth checking particular control or directly go for substantive checking.
Its like when we know test drive wont be good because of weak engine, we go for other car.

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