The Accounting Department Reports That the Balance of Accounts Receivable

question 6

Multiple Choice

The accounting department reports that the balance of accounts receivable is $210,000. You are willing to accept that balance if audit sampling suggests it is within $15,000 of the actual balance. Using a classical variables sampling plan, you compute a 95% confidence interval of $208,000 to $225,000. You would therefore:

• A)not be able to determine the acceptability of the receivable balance.
• B)accept the balance but with a lower level of confidence.
• C)take a larger sample before totally rejecting the balance and requiring adjustments.
• D)accept the $210,000 balance because the confidence interval is within the materiality limits.

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Definitions:

Bearer Instruments

Bearer instruments are financial documents that entitle the holder or bearer of the document to the rights or property stated in the document, without requiring proof of ownership.

Demand Instrument

A financial document that requires payment to be made by the issuer upon request by the holder of the document.

Demand Instrument

A financial document that requires immediate payment upon presentation.

Specific Time

A precise or particular moment or duration identified for an event or action.