After completing the tests of controls for inventories and purchases for DTB Inc. for the year ended December 31, 2020, you move on to select a sample of inventory items from the inventory sub-ledger at the year-end. For each selected balance, you will count the items in stock, verify the pricing of the inventory, and test the extensions (quantity price).

You have obtained an electronic copy of the year-end trial balance of inventory which totals $3,449,093 Your firms practice is to use dollar-unit sampling to select the balances for verification. Because the tests of controls confirmed the preliminary evaluation of IR, you are prepared to accept a 5% risk of accepting a materially misstated population. Your firm does not allocate materiality among accounts, so the tolerable

misstatement is equal to the amount of misstatement considered material for the audit ($240,000). Based on prior years audit experience, you expect to find errors of overstatement of about $34,500.

You calculate the appropriate sample size and round it up to the nearest 10 and select the sample using systematic sampling with a random start of 24,831. All balances are found to be correct, except the following:

No errors were found in checking the inventory extensions.

Inventory Item N90: Inventory quantity per perpetual

inventory records 2,400 units

Inventory quantity per count 200 units

Unit cost per perpetual inventory records $2.10

Unit cost per auditors calculation $2.10

Inventory Item G03: Inventory quantity per perpetual inventory records 100 units

Inventory quantity per count 80 units

Unit cost per perpetual inventory records $20.83

Unit cost per auditors calculation $20.83

Required:

Prepared in good form a working paper to determine the upper error and lower error bounds and conclude whether the population is correct or not. Each step should clearly specify how it relates to the facts in the question above.