Substantive Testing

The closing balance of inventory is $100,000 by the end of the financial year. An inventory test count by auditors revealed $30 overstatement and $15 understatement in a sample worth $1,000. Assume the sampling error is $500. The tolerable overstatement and understatement for the account are $3,000 and $4,000, respectively.

Is the inventory balance acceptable? Justify your conclusion. (3 marks)