An Auditor Is Planning the Confirmation of Accounts Receivable

question 25

Multiple Choice

An auditor is planning the confirmation of accounts receivable. The total of debit balances in the aged trial balance of receivables is $4 million. The auditor has decided that the tolerable misstatement (basic precision) for this sampling application is $50 000, the risk of incorrect acceptance is five per cent and zero error is expected. There are 2500 customer balances. The auditor decides to use dollar-unit sampling and determines a sample size of 100. The sampling interval for dollar-unit sampling using the systematic selection method is approximately:

• A) 50.
• B) 200.
• C) 1 000.
• D) 40 000.

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Definitions:

Economic Condition

Economic Condition refers to the state of an economy at a given time, considering factors like GDP growth rates, unemployment, inflation, and market stability.

Accounting

The systematic process of recording, analyzing, and interpreting the financial transactions of a business.

Statement of Cash Flows

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company.

Operating Activities

The day-to-day activities of a business that are directly related to producing and selling its goods or services, which generate most of its cash flows.