McMullen and Mulligan, CPAs, were conducting the audit of Cusick Machine Tool Company for the year ended December 31. Jim Sigmund, senior-in-charge of the audit, plans to use MUS to audit Cusick's inventory account. The balance at December 31 was $9,000,000. Required:

a. Based on the following information, compute the required MUS sample size: Tolerable misstatement = $360,000 Expected misstatement = $90,000 Risk of incorrect acceptance = 5%

b. Nancy Van Pelt, staff accountant, used the sample items selected in part

(a) and performed the audit procedures listed in the inventory audit program. She notes the following misstatements: P-9652