Calculate the projected likely misstatement using the difference method. Discuss the decision choice of accepting or rejecting the $166,000 book value (recorded amount) without adjustment.
Calculate the projected likely misstatement using the difference method. Discuss the decision choice of accepting or rejecting the $166,000 book value (recorded amount) without adjustment.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
10
Transcribed Image Text:1
DC 10-1
Projected Likely Misstatement. LO6 When Marge, a PA, audited the Candle Company inventory, a random sample
of inventory types was chosen for physical observation and price testing. The sample size was 80 different types of
candles and candle-making inventory. The entire inventory contained 1,740 types, and the amount in the inventory
control account was $166,000. Marge had already decided that a misstatement of as much as $6,000 in the account
would not be material. The audit work revealed the following eight errors in the sample of 80
BOOK VALUE
$600.00
15.50
65.25
83.44
16.78
78.33
13.33
93.87
$966.50
AUDIT VALUE
$622.00
14.50
31.50
53.45
15.63
12.50
14.22
39.87
$803.67
RE
ERROR AMOUNT
$ 22,00
20
(1,00)
(33.75)
(29.99)
(115)
Required:
Calculate the projected likely misstatement using the difference method. Discuss the decision choice of accepting or rejecting the
$166,000 book value (recorded amount) without adjustment.
DC163 Exanaleneb Analedon the Dacia Un
(65.83)
0.89
(54.00)
$(162.83)
Aa
A
4)
9
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