When Determining the Sample Size for the Number of Items

question 110

Multiple Choice

When determining the sample size for the number of items the auditor should count during the physical inventory,

• A) it is easy to quantify the number of items based on a formula developed by the AICPA.
• B) one of the key determinants that must be considered is internal control over the physical count.
• C) one of the key determinants that must be considered is the cost involved.
• D) generally accepted auditing standards require that at least 80% of the dollar value of the inventory should be included in the sample.

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Definitions:

Commission

A fee paid to an agent or employee for completing a task or making a sale, which is often a percentage of the sale's total value.

Legal Consequences

are the outcomes that follow from the application of the law, such as penalties for breaking the law or the results of legal judgments.

Liable

Responsible by law; legally obligated to compensate for harm or damage caused.

Contract

A contract recognized by law, involving at least two parties, each with obligations to the other.