MMC inventory sampling

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Presentation transcript:

MMC inventory sampling

The audit client’s worksheet

Audit tests For our sample of N=387 lines

Book value $1,965,560.03 Std Dev 861.52 of extended cost for book values Tolerable Misstatement 200,000. Materially Overstated 1,765,560.03

Do you see that these numbers are the same Book value $1,965,560.03 ÷ 1,703 $ 1,154.175 Std Dev 861.52 Tolerable Misstatement 200,000. ÷ 1,703 117.44 Materially Overstated 1,765,560.03 ÷ 1,703 1,036.735

If 1 is $1,154 --- almost no risk BV is overstated by $200,000 If 2 is $1,141 --- small risk the BV is overstated by $200,000 If 3 is $1,094 --- risk the BV is overstated by $200,000 increases If 4 is $1,060 --- risk the BV continues to increase If 5 is $1,036 --- 50% risk the BV is overstated by $200,000

If 1 is $1,154 --< 0.01 risk BV is overstated by $200,000 If 5 is $1,036 --- 0.50 risk the BV is overstated by $200,000

If 1 is $1,154 --- < 0.01% risk BV is overstated by $200,000 If 5 is $1,036 --- 0.50% risk the BV is overstated by $200,000