An Audit Partner Is Developing an Office Training Program to Familiarize

question 164

Multiple Choice

An audit partner is developing an office training program to familiarize his professional staff with statistical decision models applicable to the audit of dollar value balances. He wishes to demonstrate the relationship of sample sizes to population size and variability and the auditor's specifications as to tolerable misstatement and risk of incorrect acceptance. The partner prepared the following table to show comparative population characteristics and audit specifications of two populations. You are to indicate for the specified case from the above table the required sample size to be selected from population 1 relative to the sample from population 2. In case 1 the required sample size from population 1 is:

• A) Larger than the required sample size from population 2.
• B) Equal to the required sample size from population 2.
• C) Smaller than the required sample size from population 2.
• D) Indeterminate relative to the required sample size from population 2.

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Definitions:

Calendar Year

A period of one year that begins on January 1 and ends on December 31, used as an accounting period by many businesses.

Accounting Cycle

The complete series of accounting steps taken throughout the period until the financial statements are prepared, including transactions, journal entries, trial balance, and financial reporting.

Office Supplies

Items such as pens, paper, calculators, and other materials used in an office setting for daily operations.

Acquisition

The process by which one company purchases most or all of another company's shares to gain control of that company.