Question

A client's inventory is recorded at $600,000 and is comprised of 1,000 items. The auditors examined a sample of items with a recorded balance of $100,000 and determined an audited value of $90,000. What is the estimated audited value for inventory

Answer 1

Based on the calculation done below, the estimated audited value for inventory is $540,000.

How is the estimated audited value for inventory calculated?

This can be calculated using the following formula:

E = (T / S) * A ……………………… (1)

E = Estimated audited value for inventory = ?

T = Total value of inventory recorded by client = $600,000

S = Value of inventory sampled by the auditor as recorded by the client = $100,000

A = Audited value of the inventory sampled = $90,000

Substituting the values into equation (1), we have:

E = ($600,000 / $100,000) * $90,000

E = 6 * $90,000

E = $540,000

Therefore, the estimated audited value for inventory is $540,000.

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