An Auditor Established a $60,000 Tolerable Misstatement for an Account

question 5

Multiple Choice

An auditor established a $60,000 tolerable misstatement for an account balance of $1,000,000. The auditor selected a sample of every twentieth item from the population of 1,000 items that represented the asset account balance and discovered overstatements of $3,700 and understatements of $200. Under these circumstances, the auditor most likely would conclude that:

• A)there is an unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement because the total projected misstatement is more than the tolerable misstatement.
• B)there is an unacceptably high risk that the tolerable misstatement exceeds the sum of actual overstatements and understatements.
• C)the asset account is fairly stated because the total projected misstatement is less than the tolerable misstatement.
• D)the asset account is fairly stated because the tolerable misstatement exceeds the net of projected actual overstatements and understatements.

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Definitions:

Disruptive

Behaviors or actions that interrupt or disturb the normal operations, peace, or processes of individuals or groups.

Time-Out

A behavioral intervention technique used to remove an individual from a situation for a brief period to decrease unwanted behaviors.

Homeless Shelter

A facility providing temporary housing and sometimes other services to individuals and families without a home.

Trusting Relationship

A bond between individuals characterized by confidence, reliance, and belief in each other's good intentions and capabilities.