(Objective 17-5) In auditing the valuation of inventory, the auditor, Claire Butler, decided to use difference estimation. She decided to select an unrestricted random sample of 80 inventory items from a population of 1,840 that had a book value of $175,820. Butler decided in advance that she was willing to accept a maximum misstatement in the population of $6,000 at an ARIA of 5 percent. There were eight misstatements in the sample, which were as follows:
| Audit Value | Book Value | Sample Misstatements |
| $ 812.50 | $ 740.50 | $(72.00) |
| 12.50 | 78.20 | 65.70 |
| 10.00 | 51.10 | 41.10 |
| 25.40 | 61.50 | 36.10 |
| 600.10 | 651.90 | 51.80 |
| .12 | 0 | (.12) |
| 51.06 | 81.06 | 30.00 |
| 83.1 1 | 104.22 | 21.11 |
Total | $1,594.79 | $1,768.48 | $173.69 |
a. Calculate the point estimate, the computed precision interval, the confidence interval, and the confidence limits for the population. Label each calculation. Use a computer for this purpose (instructor’s option).
b. Should Butler accept the book value of the population? Explain.
c. What options are available to her at this point?
Objective 17-5
Use difference estimation in tests of details of balances.
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