acc_490_week_2_individual_assignme...

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acc_490_week_2_individual_assignme...

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Mt. Hood Furniture Company Accuracy TestACC 491: Contemporary Auditing IMt. Hood Furniture Company Accuracy TestThe objectives of this audit are to determine the accuracy of the inventory as reported by Mt. Hood Furniture Company. The goals are to determine that the inventory is accurately transcribed to the final accumulation and valuation of the inventory and that the inventory is correctly priced and accumulated. Also included are tests to determine that the proper pricing of raw materials, work in process, and finished goods are recorded.The formula for finding the sample size is N = BV x RF / TM - (AM x EF). BV stands for the book value of the total population, which is $6,753,764. RF stands for the reliability factor, which is 1. TM stands for the tolerable misstatement, which is $325,000. Tolerable misstatement represents the maximum misstatement that could occur before the population would be considered materially misstated. The lower the required tolerable misstatement relative to the number and dollar size of transactions the lower the needed tolerable deviation rate. This rate is inversely related to sample size. AM is the anticipated misstatement, which is $100,000 and EF is the expansion factor for anticipated misstatement, which is 1.15. So N= $6,753,764 x 1.00 / $325,000 - ($100,000 x 1.15) = 32.16. Assuming that an auditor accepts exposure to a risk of incorrect acceptance of 37% and form an opinion of the financial data based

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