The Client's Trial Balance Has a Balance of $410,000 for Merchandise

question 87

Multiple Choice

The client's trial balance has a balance of $410,000 for merchandise inventory.As the auditor you are willing to accept a balance that is within $20,000 of either side of the recorded balance.You compute a 95% confidence interval of $395,000 to $425,000.You could therefore:

• A)reject the trial balance amount.
• B)accept the trial balance amount.
• C)increase the sample size to assure more precision.
• D)use alternative audit procedures to satisfy yourself as to the correct balance.

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Definitions:

Revolving Credit Agreement

A credit arrangement that allows a company or individual to borrow, repay, and borrow again up to a certain credit limit.

Commitment Fee

A fee charged by a bank for guaranteeing to have loanable funds available. The fee is charged on un borrowed amounts up to the maximum of the guarantee. See Revolving credit agreement.

Line of Credit

An arrangement between a financial institution and a customer that establishes a maximum loan balance the borrower can access.

Clean-Up Requirement

A term often used in banking, referring to a requirement that a borrower must pay down a line of credit to zero or to a specific level at least once within a certain period.