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A CPA is interested in testing the fairness of the ending inventory balance at an audit client. He has relatively little experience using statistical sampling methods and, does not like to turn anything over to random chance. He used a judgmental sample of selecting items for testing. He selected 26 items with a total book value of $720,000. In his sample he found a combined $80,000 in overstatement errors. The book value of inventory on the client's record is $1,090,000. Overall materiality for the engagement is $500,000. His policy is to use 50% or less of overall materiality as tolerable misstatement for any one account.
a) What is your opinion of the method of selecting his sample?
b) Evaluate the results. Does he have sufficient evidence to conclude the balance is fairly stated
c) Provide recommendations to the CPA about how to select and evaluate a sample for testing inventory.
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Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the direct labor efficiency variance is unfavorable.
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NewDrugs, Inc., an international corporation, has identified a list of expenditures it believes to be intangible assets. Which items would be recognized as assets under US GAAP? Which items would be capitalized under IFRS?
Can the state revenue agency collect the outstanding payroll tax from greater under the Federal joint and several liability rules for tax obligation of consolidated return affiliates?
In its most recent financial statements, Newhouse Inc. reported $50 million of net income and $810 million of retained earnings. The previous year, its balance sheet showed $780 million of retained earnings. What were the total dividends paid to s..
Explain the product and the production process. Describe how you would find out the quantity of spoiled units that are normal versus abnormal. Explain how you would determine the cost of good units, normal spoilage and abnormal spoilage.
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