The following information is provided for the audit of Vial-tech. Performance materiality is twice theamount of materiality. There are no other misstatements other than those indicated.AccountAccounts receivableInventoryFixed assetsAll other accounts (net)Net assets$5,000$20,000$25,000Amount$45,0001,000,0002,500,0002,000,0001,500,0007,000,000PerformanceMaterialityAmount includes projected misstatement and allowance for sampling risk:In testing accounts receivable, the auditor tested $200,000 of receivables and found $5,000 ofmisstatements. The direct projected misstatement in accounts receivable excluding sampling risk is:O Insufficient information to determine.40,00060,00010,00040,000150,000EstimatedMisstatementsOverstatingIncome45,00010,0005,0005,000

Accounts receivable indicates the amounts which company has not received from their debtors to whom…

Answered: The following information is provided…

The following information is provided for the audit of Vial-tech. Performance materiality is twice the amount of materiality. There are no other misstatements other than those indicated.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter11: Auditing Inventory, Goods And Services, And Accounts Payable: The Acquisition And Payment Cycle

Section: Chapter Questions

Problem 23RQSC

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You are evaluating audit results for assets in the audit ofRoberts Manufacturing. You set the preliminary judgment about materiality at $50,000.The account balances, performance materiality, and estimated overstatements in theaccounts are shown next.Account Performance Estimate of TotalAccount Balance Materiality OverstatementsCash $ 50,000 $ 5,000 $ 1,000Accounts receivable 1,200,000 30,000 20,000Inventory 2,500,000 50,000 ?Other assets 250,000 15,000 12,000Total $4,000,000 $100,000 ? a. Assume you tested inventory amounts totaling $1,000,000 and found $10,000 inoverstatements. Ignoring sampling risk, what is your estimate of the total misstatement in inventory?b. Based on the audit of the assets accounts and ignoring other accounts, are the overallfinancial statements acceptable? Explain.c. What do you believe the auditor should do in the circumstances?
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