Armstrong and Elder, CPAs, were conducting the audit of Kittanning Brick Company for the year ended December 31. Bryce the senior-in-charge of the audit plans to use MUS to audit Kittannings inventory account. The balance at December 31 was $9,000,000. (10 points)

Sample size = Confidence Factor/ (Tolerable Misstatement/Population Value)

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. Carson, staff accountant, used the sample items selected in part (a) and performed the audit procedures listed in the inventory audit program. She noted the following misstatements:

Misstatement Number	Book Value	Audit Value
1	$10,000	$7,500
2	9,000	6,000
3	60,000	0
4	800	640

Using this information calculate the upper misstatement limit.

What conclusion should Armstrong and Elder make concerning the inventory?