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Your uncle Bob, a CPA, has recently started auditing and he wants your advice on some tests of sales transactions he is conducting. Bob selected a haphazard sample of 15 sales with a total book value of $75,000. In his sample, he found a total of $500 in net overstatement errors. The total sales balance per books is $10,000,000. Overall materiality for the engagement is $300,000. Tolerable misstatement for Sales is $70,000. If the sample results indicate that Bob’s best estimate of total misstatement in sales is $35,000, could Bob safely conclude that no additional work is needed in this area? Include in your answer a clear discussion of how sample results are compared to tolerable misstatement.
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