Assume that you are auditing the inventory of Husky Manufacturing Company for the year ended December 31, 2018, and you are using MUS. The book value is $8,124,998.66. The risk of incorrect acceptance is 10% (90% confidence level). The tolerable misstatement is $275,000 and the expected misstatement is $80,000, so the ratio of expected misstatement to tolerable misstatement is 29%. The ratio of tolerable misstatement to the population book value is 3.38% (rounded to 3.4%).

a. Calculate the sample size and the sampling interval. 

b. Calculate the total estimated misstatement assuming the following misstatements were found in the sample:

c. What conclusion do you reach based on your calculation?

Transcribed Image Text:

Book Value $41,906.45 $335,643.28 Audit Value $36,906.45 $333,643.28