1. MMC inventory sampling

2. The audit client’s worksheet

3. Audit tests
For our sample of
N=387 lines

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

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

8. If 1 is $1,154 --- almost no risk BV is overstated by $200,000
If 2 is $1, small risk the BV is overstated by $200,000
If 3 is $1, risk the BV is overstated by $200,000 increases
If 4 is $1, risk the BV continues to increase
If 5 is $1, % risk the BV is overstated by $200,000

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

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