I need help with part 2 please. Thank you

Bob Downe is auditing Red Cedar Office Furniture (RCOF), a manufacturer of office furniture and custom cabinets. RCOF was founded 25 years ago by a husband-and-wife team and has grown rapidly in the last five years as solid, environmentally friendly wooden furniture has grown in popularity. The company has inventory consisting of raw materials, work in process, and finished goods with a book value of $6,719,028.95.
You have been assigned the task of testing the accuracy of the final inventory compilation for RCOF. You may assume that you have separately observed the inventory and that you are satisfied that the inventory was accurately counted. However, you need to test that quantities were accurately transcribed to the final accumulation and valuation of inventory and that the inventory is correctly priced and accumulated. A file showing the client’s accumulation of inventory is available in Wiley Course Resources.
This case will guide you through the process of selecting a sample from the client’s inventory, comparing audit values with book values, and drawing a conclusion about the fair presentation of inventory.
C10.1 (LO 6) An icon reads, Challenging PPS sampling audit case
Part 1. Determine the objectives of the test. You are auditing both quantities and pricing of the final inventory accumulation.

Explain the assertions that you are testing.
Explain the evidence that you would obtain to test those assertions.

Part 2. Determine sample size based on the following judgments (round sample size to the nearest whole number).

Tolerable misstatement is assessed at $325,000.
The risk of incorrect acceptance is assessed at 37%.
Expected misstatement is assessed at $100,000.
Zero overstatements are expected.
Transcribed Image Text:Question C10.1 is based on the following case. The data file needed to complete this case is available in Wiley Course Resources. Bob Downe is auditing Red Cedar Office Furniture (RCOF), a manufacturer of office furniture and custom cabinets. RCOF was founded 25 years ago by a husband-and-wife team and has grown rapidly in the last five years as solid, environmentally friendly wooden furniture has grown in popularity. The company has inventory consisting of raw materials, work in process, and finished goods with a book value of $6,719,028.95. You have been assigned the task of testing the accuracy of the final inventory compilation for RCOF. You may assume that you have separately observed the inventory and that you are satisfied that the in- ventory was accurately counted. However, you need to test that quantities were accurately transcribed to the final accumulation and valuation of inventory and that the inventory is correctly priced and accu- mulated. A file showing the client's accumulation of inventory is available in Wiley Course Resources. This case will guide you through the process of selecting a sample from the client's inventory, comparing audit values with book values, and drawing a conclusion about the fair presentation of inventory. C10.1 (LO 6) Challenging PPS sampling audit case hon indi Part 1. Determine the objectives of the test. You are auditing both quantities and pricing of the final inventory accumulation. a. Explain the assertions that you are testing. b. Explain the evidence that you would obtain to test those assertions. Part 2. Determine sample size based on the following judgments (round sample size to the nearest whole number). a. Tolerable misstatement is assessed at $325,000. b. The risk of incorrect acceptance is assessed at 37%. c. Expected misstatement is assessed at $100,000. d. Zero overstatements are expected. 21

Question

I need help with part 2 please. Thank you

Bob Downe is auditing Red Cedar Office Furniture (RCOF), a manufacturer of office furniture and custom cabinets. RCOF was founded 25 years ago by a husband-and-wife team and has grown rapidly in the last five years as solid, environmentally friendly wooden furniture has grown in popularity. The company has inventory consisting of raw materials, work in process, and finished goods with a book value of $6,719,028.95.
You have been assigned the task of testing the accuracy of the final inventory compilation for RCOF. You may assume that you have separately observed the inventory and that you are satisfied that the inventory was accurately counted. However, you need to test that quantities were accurately transcribed to the final accumulation and valuation of inventory and that the inventory is correctly priced and accumulated. A file showing the client’s accumulation of inventory is available in Wiley Course Resources.
This case will guide you through the process of selecting a sample from the client’s inventory, comparing audit values with book values, and drawing a conclusion about the fair presentation of inventory.
C10.1 (LO 6) An icon reads, Challenging PPS sampling audit case
Part 1. Determine the objectives of the test. You are auditing both quantities and pricing of the final inventory accumulation.

Explain the assertions that you are testing.
Explain the evidence that you would obtain to test those assertions.

Part 2. Determine sample size based on the following judgments (round sample size to the nearest whole number).

Tolerable misstatement is assessed at $325,000.
The risk of incorrect acceptance is assessed at 37%.
Expected misstatement is assessed at $100,000.
Zero overstatements are expected.

Question C10.1 is based on the following case. The data file needed to complete this case is available in
Wiley Course Resources.
Bob Downe is auditing Red Cedar Office Furniture (RCOF), a manufacturer of office furniture and
custom cabinets. RCOF was founded 25 years ago by a husband-and-wife team and has grown rapidly
in the last five years as solid, environmentally friendly wooden furniture has grown in popularity. The
company has inventory consisting of raw materials, work in process, and finished goods with a book
value of $6,719,028.95.
You have been assigned the task of testing the accuracy of the final inventory compilation for RCOF.
You may assume that you have separately observed the inventory and that you are satisfied that the in-
ventory was accurately counted. However, you need to test that quantities were accurately transcribed
to the final accumulation and valuation of inventory and that the inventory is correctly priced and accu-
mulated. A file showing the client's accumulation of inventory is available in Wiley Course Resources.
This case will guide you through the process of selecting a sample from the client's inventory,
comparing audit values with book values, and drawing a conclusion about the fair presentation of
inventory.
C10.1 (LO 6) Challenging PPS sampling audit case
hon indi
Part 1. Determine the objectives of the test. You are auditing both quantities and pricing of the final
inventory accumulation.
a. Explain the assertions that you are testing.
b. Explain the evidence that you would obtain to test those assertions.
Part 2. Determine sample size based on the following judgments (round sample size to the nearest whole
number).
a. Tolerable misstatement is assessed at $325,000.
b. The risk of incorrect acceptance is assessed at 37%.
c. Expected misstatement is assessed at $100,000.
d. Zero overstatements are expected.
21

Accepted Answer

SOLUTION :- 
Given that , 
The Book value of population tested is (BV) =  $6719028.95
The Tolearble…