Accounting 491 Audit Sampling and Evaluation of Mt. Hood Furniture's Inventory

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A u d i t S a m p l i n g C a s e M e m o | 1 Accounting 491 Audit Sampling and Evaluation of Mt. Hood Furniture's Inventory In the context of the Mt. Hood Furniture inventory audit, explain the process of determining the sample size, selecting a Probability Proportionate to Size (PPS) sample, and evaluating projected population misstatements. How do quantitative and qualitative factors influence the conclusions drawn from the sample? Be sure to include an explanation of the tolerable misstatement (TM), anticipated misstatement (AM), and the risk of incorrect acceptance. Word Count Requirement: Your response should be between 600 - 800 words.
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A u d i t S a m p l i n g C a s e M e m o | 2 Accounting 491 Week Five Date: INTEROFFICE MEMORANDUM TO: John Smith FROM: Learning Team B SUBJECT: Mt. Hood Furniture Inventory Sample Workpapers DATE: February 18, 2012 The purpose of this memo is to summarize the findings of Mt. Hood Furniture’s final inventory compilation. We have observed the inventory and are satisfied that the inventory was accurately counted. However, we needed to perform additional testing to ensure that the quantities were accurately recorded into the final accumulation and valuation of inventory and that Mt. Hood Furniture’s inventory is correctly priced and accumulated. Our audit team will identify the audit objectives, determine sample size, develop a risk of incorrect acceptance scenario, select a probability proportionate to size (PPS) sample, determine the amount of projected population misstatement, and develop a statistical and audit conclusion based on our sample. Audit Objectives

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