Assume that a reasonable advance estimate of the standard deviation was impractical in 7-7. How should the auditor determine an appropriate estimate?

7-7:

In question 7-4, the population size is 10,000 and the estimated standard deviation is 40. Last year’s recorded book value was \($2,000,000\) and the client believes this year’s will be approximately the same. The auditor decides that a material misstatement of inventory would be \($50,000\) at a 95% confidence level. Calculate the required sample size.

Question 7-4:

Assume that an auditor decides to use unstratified mean-per-unit estimation to estimate the value of inventory in cooperation with a client. The client has not taken a complete physical inventory because of the high cost of doing it. Why is mean-per-unit preferable to difference and ratio estimation in this situation ?