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Probability Proportional to Size Sampling Method
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Article:
PPS Sampling Tables 1 & 2
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Probability
Proportional to Size (PPS) Sampling Tables
Table
1: Reliability Factors for Misstatements of Overstatement
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Number of Overstatement Misstatements
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Risk of Incorrect
Acceptance
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1%
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5%
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10%
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15%
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20%
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25%
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30%
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37%
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50%
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0*
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4.61
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3.00
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2.31
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1.90
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1.61
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1.39
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1.21
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1.00
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0.70
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1
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6.64
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4.75
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3.89
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3.38
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3.00
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2.70
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2.44
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2.14
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1.68
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2
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8.41
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6.30
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5.33
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4.72
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4.28
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3.93
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3.62
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3.25
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2.68
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3
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10.05
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7.76
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6.69
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6.02
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5.52
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5.11
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4.77
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4.34
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3.68
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4
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11.61
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9.16
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8.00
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7.27
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6.73
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6.28
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5.90
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5.43
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4.68
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5
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13.11
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10.52
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9.28
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8.50
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7.91
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7.43
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7.01
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6.49
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5.68
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6
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14.57
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11.85
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10.54
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9.71
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9.08
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8.56
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8.12
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7.56
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6.67
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7
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16.00
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13.15
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11.78
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10.90
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10.24
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9.69
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9.21
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8.63
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7.67
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8
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17.41
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14.44
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13.00
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12.08
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11.38
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10.81
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10.31
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9.68
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8.67
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9
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18.79
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15.71
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14.21
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13.25
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12.52
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11.92
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11.39
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10.74
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9.67
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10
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20.15
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16.97
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15.41
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14.42
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13.66
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13.02
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12.47
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11.79
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10.67
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*The
0 row is always used for the reliability factor in the sample size formula
and for basic precision.
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From
the American Institute of Certified Public Accountants: Auditing Practice Release,
Audit Sampling, 1999(as cited in Whittington &Pany, 2006)
Table
2: Expansion Factors for Expected Misstatement
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Risk of Incorrect
Acceptance
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1%
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5%
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10%
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15%
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20%
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25%
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30%
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37%
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50%
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Factor
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1.9
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1.6
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1.5
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1.4
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1.3
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1.25
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1.2
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1.15
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1.0
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Use the following company data and the PPS Sampling Tables 1
& 2:
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The recorded book value of
these accounts is $3,460,000.
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The company has a tolerable
error of $63,460.
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The anticipated error is
$13,000.
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The risk of incorrect
acceptance is 5%.
·
The acceptable number of
overstatements of misstatements is 2.
Use probability proportional to size (PPS) sampling to do the
following:
A. Determine the reliability factor.
B. Determine the correct expansion factor.
C. Determine the sample size you should use.
D. Determine the sampling interval you should use.
