An Auditor Is Confirming a Population of Accounts Receivable for Monetary

question 8

Multiple Choice

An auditor is confirming a population of accounts receivable for monetary correctness. The population totals $2,000,000 and a sample of 200 confirmations is obtained. Upon audit, no misstatements are uncovered in the sample. Assuming an ARIA of 10%, the confidence factor would be 2.31. Applied to a sampling interval of $10,000, the upper misstatement bound is calculated as

• A) $462.
• B) $4,329.
• C) $23,100.
• D) $865,801.

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Definitions:

Holding Cost

The costs related to keeping inventory that hasn't been sold, covering storage fees, insurance, and losses due to items going bad.

Fixed Cost

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance.

Economic Order Quantity

A calculation used to determine the optimal order quantity that minimizes the total inventory costs, including holding and ordering costs.

Inventory Policy

The set of guidelines a company follows to determine how much inventory should be kept on hand to meet customer demand and manage supply chain efficiency.