Assume That You Are the Auditor in Charge of Designing

question 46

Essay

Assume that you are the auditor in charge of designing a sampling plan to evaluate the cost of the year-end inventory balance for BCS,Inc.The company uses FIFO costing to determine the cost of its inventory.Additional information is provided below.The total amount of inventory is $10,800,000.The desired level of assurance is 90% (10% risk of incorrect acceptance).The ratio of estimated misstatement to tolerable misstatement is 0.00.The confidence factor is 2.31 from the table in the chapter.Tolerable misstatement is $1,000,000.A partial list of inventory is given below: $$\begin{array} { | l | r | r | } \hline \text { Inventory } &{ \text { Cost } } & \begin{array} { l } \text { Cumulative } \\\text { item }\end{array} \\\hline 001 & 4,821 & 4,821 \\\hline 002 & 23,822 & 28,643 \\\hline 003 & 128,119 & 156,762 \\\hline 004 & 36,707 & 193,469 \\\hline 005 & 13,289 & 206,758 \\\hline 006 & 39,385 & 246,143 \\\hline 007 & 95,331 & 341,474 \\\hline 008 & 4,871 & 346,345 \\\hline 009 & 70,321 & 416,666 \\\hline 010 & 4,841 & 421,507 \\\hline 011 & 59,773 & 481,280 \\\hline 012 & 3,763 & 485,043 \\\hline 013 & 61,884 & 546,927 \\\hline 014 & 33,794 & 580,721 \\\hline 015 & 4,971 & 585,692 \\\hline 016 & 48,733 & 634,425 \\\hline 017 & 49,322 & 683,747 \\\hline 018 & 3,748 & 687,495 \\\hline 019 & 29,597 & 717,092 \\\hline 020 & 6,979 & 724,071 \\\hline \ldots & \ldots & \\\hline\end{array}$$

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Definitions:

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