Based on the audit of the assets accounts and ignoring other accounts, are the overall financial statements acceptable? Explain.

You are evaluating audit results for assets in the audit of Roberts
Manufacturing. You set the preliminary judgment about materiality at $50,000. The ac-
count balances, performance materiality, and estimated overstatements in the accounts
are shown next.
Account
Account
Balance
Performance
Materiality
Estimate of Total
Overstatements
Cash $ 50,000 $ 5,000 $ 1,000
Accounts receivable 1,200,000 30,000 20,000
Inventory 2,500,000 50,000 ?
Other assets 250,000 15,000 12,000
Total $4,000,000 $100,000 ?
Required
Required
Required
Chapter 8 / AUDIT PLANNING AND MATERIALITY 263
a. Assume you tested inventory amounts totaling $1,000,000 and found $10,000 in
overstatements. Ignoring sampling risk, what is your estimate of the total misstate-
ment in inventory?
b. Based on the audit of the assets accounts and ignoring other accounts, are the overall financial statements acceptable? Explain.
c. What do you believe the auditor should do in the circumstances?

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