You are evaluating audit results for assets in the audit of Rivers Manufacturing. You set the preliminary judgment about materiality of $52,000. The account balances, performance materiality and estimated overstatements in the accounts are shown below:

Account	Account balance	Performance materiality	Estimate of total overstatements
Cash	40,000	5,000	1,000
Account receivable	1,100,000	30,000	20,000
Inventory	2,700,000	50,000	?
Other assets	250,000	15,000	12,000
Total	4,090,000	100,000

Required:

a. Assume you tested inventory amount totalling $1million and found $8,000 in overstatement. Ignoring sampling risk, what is your estimate of the total misstatement in inventory?

b. Based on the audit of the asset accounts and ignoring other accounts, are the overall financial statements acceptable? Explain.

c. What do you believe the auditor should do in the circumstances?

d. Why the total performance materiality is not the same as the preliminary materiality? Should they be equal?