The firm of Donald was conducting the audit of a client for the fiscal year ended October 31. Michelle Donald, the partner in charge of the audit, decides that MUS is the appropriate sampling technique to use in order to audit the client's inventory account. The balance in the inventory at October 31 was $3,400,000. Michelle has established the following: risk of incorrect acceptance = 5% (i.e., the desired confidence level of 95%), tolerable misstatement = $160,000, and expected misstatement = $48,000.

Required:

1. Calculate the sample size and sampling interval.
2. Hon Zhu, staff accountant, performed the audit procedures listed in the inventory audit program for each sample item. Using the sample size computed in part (a), calculate the upper limit on misstatement based on the following misstatements. What should Hon conclude about Coomes’ inventory account?

	Error Number	Book Value	Audit Value
	1	$ 26,000	$ 13,000
	2	4,000	2,500
	3	48,000	30,000

Answer rating: 100% (QA)

a Sample size 200 sampling interval 200 b ... View the full answer