Sample content Audit Sampling Case Memo and Presentation Memorandum To: John Smith, Audit Partner From: Learning Team B Date: 4/21/2014 Re: Mt. Hood Furniture Case Summary Throughout the process of determining the accuracy for the final inventory compilation for Mt. Hood Furniture, Team B has established four audit objectives. The primary objective is to test the existence of the respective inventory through each of the stages of completion. The concerns of the auditing team including the objectives include an inventory count. The second objective is to evaluate the completeness of the inventory account to determine whether all the items will be included in the count as their needed. Audit Team B is focused with cut-off problems and recordings in the inventory within a respective period. The third objective is to test the rights and obligation of the inventory in order to confirm that Mt. Hood Furniture would legally own inventory while not holding any items in consignmen

1. ACC 491 Week 5 Learning Team Assignment Audit Sampling Case Memo and Presentation
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Sample content
Audit Sampling Case Memo and Presentation
Memorandum

2. To: John Smith, Audit Partner
From: Learning Team B
Date: 4/21/2014
Re: Mt. Hood Furniture Case Summary
Throughout the process of determining the accuracy for the final inventory
compilation for Mt. Hood Furniture, Team B has established four audit objectives.
The primary objective is to test the existence of the respective inventory through
each of the stages of completion. The concerns of the auditing team including the
objectives include an inventory count. The second objective is to evaluate the
completeness of the inventory account to determine whether all the items will be
included in the count as their needed. Audit Team B is focused with cut-off
problems and recordings in the inventory within a respective period. The third
objective is to test the rights and obligation of the inventory in order to confirm that
Mt. Hood Furniture would legally own inventory while not holding any items in
consignment. The final audit objective is to evaluate by testing and validation, of
which confirms the accuracy and value of the inventory. If the inventory accounts
results in being overstated, the financial statements will result in being overstated.
In regards to the PPS sampling technique, the population of all accounts for
finished goods, raw materials, and overall work in progress with a positive balance.
In regards to the PPS sampling technique, the population for all the accounts
includes finished goods, raw materials, and work in process as long as they all
have a positive balance. The stated book value for the accounts combined results
in $6,753,764.00. The logical sampling unit is a random selection of stock numbers
which belong to each account, in comparison to earlier observations of actual
inventories. The differences in the said account balances total at $1,000 and
should be paid special attention considering these accounts combined prove to be
materially misstated.
The process of testing accuracy of the quantities for the inventory account, the
auditing team takes various factors into account before they are able to determine
the sample size. Audit Team B took in account the book value of the inventory
account and anticipated misstatements, of which includes a direct relationship with
sample size, as well as the reliability factor and tolerable misstatement, which has
the opposite relationship to the sample size. There is an additional consideration
for the expansion factor due to the auditor’s anticipation of a misstatement.

3. The book value of the inventory, including raw materials, finished goods, small
tools, are observed and accounted for in the stated $6,753,764. The amount of
misstatement Audit Team B anticipates the inventory account of $100,000 for Mt.
hood Furniture. The reliability factor is 1.00 as a result of the assessment risk for
the incorrect acceptance of 37% at the assessed amount for a tolerable amount of
$325,000. The expansion factor is further connected to the risk of an incorrect
acceptance and is 1.15. Audit Team B includes a collected judgment, experience,
and knowledge in regards to the company in the assessments of the factors
mentioned. Audit Team B has also included
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