Question: World-famous mining mogul Steve Wilsey hired
World-famous mining mogul Steve Wilsey hired the public accounting firm of Joe Wang Associates, PC, to conduct an audit of his new acquisition, Cougar Goldust, Inc. The gold inventory was scheduled to be taken on November 30. The perpetual records show only the weight of the gold in various inventory bins. Wang has decided to use a variables sampling approach (difference estimation) to determine the correct weight of the gold on hand. (Note that the pricing of the inventory is straightforward because the market value on November 30 determines the price for balance sheet purposes.) There are 4,000 bins in the Cougar warehouse. The bins will serve as the sampling units. Wang’s desired level of confidence is 90 percent.
The tolerable misstatement is set at 35,000 ounces, and the expected misstatement is 10,000 ounces. The perpetual record shows 700,000 ounces on hand.
Required: [Note: Parts (a) and (b) are independent of each other.]
a. Compute the preliminary sample size. The estimated standard deviation is 25 ounces.
b. Assume that Wang examined a sample of 100 bins. The following information summarizes the results of the sample data gathered by Wang:
![World-famous mining mogul Steve Wilsey hired the public accounting firm of Joe Wang Associates, PC, to conduct an audit of his new acquisition, Cougar Goldust, Inc. The gold inventory was scheduled to be taken on November 30. The perpetual records show only the weight of the gold in various inventory bins. Wang has decided to use a variables sampling approach (difference estimation) to determine the correct weight of the gold on hand. (Note that the pricing of the inventory is straightforward because the market value on November 30 determines the price for balance sheet purposes.) There are 4,000 bins in the Cougar warehouse. The bins will serve as the sampling units. Wang’s desired level of confidence is 90 percent.
The tolerable misstatement is set at 35,000 ounces, and the expected misstatement is 10,000 ounces. The perpetual record shows 700,000 ounces on hand.
Required: [Note: Parts (a) and (b) are independent of each other.]
a. Compute the preliminary sample size. The estimated standard deviation is 25 ounces.
b. Assume that Wang examined a sample of 100 bins. The following information summarizes the results of the sample data gathered by Wang:
Compute the sample results and indicate what conclusion Wang should make concerning the inventory balance.](../images/world-famous-mining-mogul-steve-wilsey-hired-the-public-accounting-firm-117818-1.jpg)
Compute the sample results and indicate what conclusion Wang should make concerning the inventory balance.
Transcribed Image Text:
Squared Audit Difference Difference Recorded Audited Audit Difference Number Weight Weight 445 440 25 2 174 170 4 16 29 217 215 2 30 96 97 (1) Total 24,000 23,600 400 17,856
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