accounting
Answers
1. The audit objectives that are accomplished by this test include ensuring that the quantities have been accurately transcribed to the final accumulation and valuation of inventory, that the inventory is correctly priced and accumulated, and that the book values reconciled with the audit observation values. 2. The sample size determined for the audit would be 40 items based on the given audit judgments. 3. The scenario consistent with setting the risk of incorrect acceptance at 37 percent would involve setting the expected mean misstatement at $0, the tolerable misstatement at an amount in excess of the expected misstatement ($325,000), and the desired probability of incorrect acceptance at 37 percent. 4. The sample would be selected using a PPS sample of the specified inventory population with a sample size of 40 items. 5. The tests that should be performed to test the pricing of raw materials, work in progress, and finished goods include comparing the prices of the items to the prices used in previous periods, testing the procedures for determining prices, and validating prices by testing supplier invoices. 6. The amount of projected population misstatement based on the sample would be determined by calculating the point estimate and the upper limit of the confidence interval around the point estimate. 7. The statistical conclusion based on the sample would be that the tolerable misstatement is not exceeded, and the audit conclusion based