A client's inventory is recorded at $300,000 and is comprised of 1,000 items.If auditors examined a sample of 200 items and found a total misstatement of $20,000 (overstatement),what is the estimated audited value for inventory?
A)$20,000
B)$100,000
C)$200,000
D)$400,000

Question

Quizplus · Accepted Answer

To estimate the audited value of inventory, we need to use the ratio of the misstatement found in the sample to the total number of items in the inventory.

Ratio of misstatement in the sample = Misstatement in the sample / Sample size = $20,000 / 200 = $100 per item

Estimated misstatement in the total inventory = Ratio of misstatement in sample × Total number of items = $100 × 1,000 = $100,000

Therefore, the estimated audited value for inventory would be the recorded value of $300,000 minus the estimated misstatement of $100,000, which equals $200,000 (Option C).

A Client's Inventory Is Recorded at $300,000 and Is Comprised