FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Assume that you are auditing the inventory of Husky Manufacturing Company for the year ended December 31, 2015, 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%.
- Calculate the
sample size and the sampling interval. - 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?
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