SUBSTANTIVE TEST SAMPLING: Your client is a retailer with thousands of items in inventory and a management-calculated balance of $500 000. You are concerned that the cost of inventory items taken at stocktake should be correct, and you are particularly concerned with overstatement. This is a new client, and you believe a sale of the business may be in the plans. For the current portion of this test, you take a sample of stock items, recount them, and calculate their cost. Controls over stocktake are very good, as is your confidence in management. You are unable to perform an analytical review for this account. You have decided to use PPS sampling. Assume that on testing, you find one error on the second sample which overstates that stock item by $6000.

Required: Design and perform the test and form your conclusions. Justify your decisions.