Question: You are performing a price test of inventory, which has a book value of $2,750,699 and 3,875 items. Tolerable misstatement is $150,000, expected misstatement is

You are performing a price test of inventory, which has a book value of $2,750,699 and 3,875 items. Tolerable misstatement is $150,000, expected misstatement is $30,000, and the TD risk is 10%.

Required
a. What sampling interval should be used for this sample?
b. Without prejudice to your answer in part (a), assume that the sampling interval was $45,000 and the following misstatements were found. Evaluate these misstatements and determine the most likely upper misstatement limits separately for overstatements andunderstatements:

Book Value Audit Value 5,000 10,000 $4,750 10,300 Misstatement $250 (300)

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a The sampling interval is 150000 30000 x 15 231 4545454 b Most likely misstatement Oversta... View full answer

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