Which of the Following Best Describes the Auditors' Response to a Client's

question 53

Multiple Choice

Which of the following best describes the auditors' response to a client's use of statistical sampling techniques to estimate the inventory?

• A)The auditors should satisfy themselves as to the statistical validity of the technique,and the reasonableness of the allowance for sampling risk and sampling error used.
• B)The auditors should qualify their opinion,because the client must perform a complete count of the inventory.
• C)The auditors should increase the extent of their test counts to compensate for the use of a statistical technique.
• D)The auditors should withdraw from the engagement.

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Definitions:

Federal Security Laws

A body of laws enacted by the federal government to regulate the sale and distribution of securities to protect investors.

Debenture Bonds

A type of debt instrument that is not secured by physical assets or collateral but is backed only by the issuer's creditworthiness and reputation.

General Credit

A broad term that can refer to the creditworthiness of a business or the general ability to borrow money through financial instruments.

Market Interest Rate

The rate of interest prevailing in the market for securities, affecting the cost of borrowing or the return on investments.