To determine the projected misstatement for the population using ratio estimation, the following calculation can be used:
Projected Misstatement=(Sample MisstatementSample Book Value)×Population Book ValueProjected Misstatement=(Sample Book ValueSample Misstatement​)×Population Book Value Given:
Sample Misstatement = $420,000
Sample Book Value = $12,000,000
Population Book Value = $20,000,000
Projected Misstatement=(420,00012,000,000)×20,000,000Projected Misstatement=(12,000,000420,000​)×20,000,000 Projected Misstatement=0.035×20,000,000=700,000Projected Misstatement=0.035×20,000,000=700,000 Therefore, the projected misstatement is $700,000.
Reference:
IIA Standards: 2320 - Analysis and Evaluation
IIA Practice Guide: Statistical Sampling