Chapter $09$ Problem $9-26$ LO $9-5,9-6$

You are in charge of the audit of Hipp Supply Company for the year ended December $31.$ In prior years, your firm observed the inventory and tested compilation and pricing. Various misstatements were always found. About $10$ percent of the dollar value of the inventory is usually tested.

This year you have established the tolerable misstatement to be $$5,000.$ The entity's book value is $$97,500.$ The entity has $960$ inventory items, the number of which has been determined by examining inventory codes. Each item will be tagged with a prenumbered inventory tag numbered from $1$ to $960.$ You plan to evaluate the results using classical variables sampling $($difference$.$ estimation$).$

Assume you have selected a sample of $100$ items randomly. For each sample item, audit tests are performed to make sure that the physical count is correct, the pricing is accurate, and the extensions of unit price and quantity are correct. The results are summarized as follows:

$\backslash$table$[[$Inventory Tag Number,Book Value,Audit Value,Audit Difference,Squared Audi Difference$],[6,$$ $100,$$ $100,$$$0,$$$0$