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may i ask if the below is the meaning of the projected misstatement ?
if an auditor has reviewed the sample of inventory and realized it was a immaterial however when it was extrapolated to a population, it’s a material misstatement ? therefore it’s called projected misstatement ?
Projected/extrapolated mean the same thing – i.e. estimating misstatement in a population based on the misstatements in a sample. The projection may or may not be material.
For example, using the so-called “ratio method” at its simplest:
Recorded population $800,000
Sample value $270,000
Sample errors $5,600 totalProjected error is Actual error x Population/Sample = 5,600 x 800k/270k = approx $16,600 (it is meaningless to be exact)
This is then compared with the pre-determined materiality threshold – if it was 2% of the population value (i.e. $16k), it’s material – but if the threshold was 2.5% of the population value ($20k) it’s immaterial.
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