Question: An auditor performed a random sample to test inventories for valuation. Several items were determined to be either incorrect [regarding price or quantity or both].

An auditor performed a random sample to test inventories for valuation. Several items were determined to be either incorrect [regarding price or quantity or both].

The two-sided 90% confidence interval on the estimated overstatement was as follows:

LOWER CONF. LIMIT: $(403,000)

UPPER CONF. LIMIT: $970,000

The maximum tolerable misstatement is $500,000.

a.Illustrate the results by sketching them on a 1-dimensional line, giving amounts

b.Describe those results in words [i.e., verbally].

c.What do these results imply regarding internal controls over inventory?

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