Assume that you are auditing the inventory of Husky Manufacturing Company for the year ended December 31, 2013, and you are using MUS. The book value is $8,124,998.66. The risk of incorrect acceptance is 10% (90% confidence level). The tolerable misstatement is $275,000, and expected misstatement is $80,000, so the ratio of expected misstatement to tolerable misstatement is 29%. The ratio of tolerable misstatement to the population book value is 4.3%.
a. Calculate the sample size and the sampling interval.
b. Calculate the total estimated misstatement assuming the following misstatements were found in the sample:
Book Value Audit Value
$41,906.45 ....... $36,906.45
$335,643.28 ....... $333,643.28
What conclusion do you reach based upon your calculation?

  • CreatedSeptember 22, 2014
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