Solo,CPA,performed a Nonstatistical Sampling Plan to Examine the Inventory Balances

question 104

Multiple Choice

Solo,CPA,performed a nonstatistical sampling plan to examine the inventory balances of Hope Inc.,and estimated the account balance by projecting the misstatement based on the number of items examined.In selecting her sample of 70 items,she used an expected misstatement of $40,000 and a tolerable misstatement of $65,000.The account balance consisted of 1,050 items totaling $1,200,000.The sample recorded value was $80,000,and the audited value was $76,000.What conclusion did Solo draw regarding the account balance?

• A) Accept because the expected misstatement is less than the tolerable misstatement
• B) Reject because the expected misstatement is greater than the expected misstatement
• C) Accept because the expected misstatement is less than the expected misstatement
• D) Reject because the expected misstatement is greater than the tolerable misstatement

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Definitions:

Lessors

Entities that lease an asset to a lessee, typically retaining ownership of the asset for the duration of the lease agreement.

Market Rent

The average rent that similar properties in the same area are fetching on the open market; used as a benchmark in lease agreements.

Fair Value

The proceeds from selling an asset or the outlay to relocate a liability in a planned interaction among market stakeholders on the benchmark date.

Capital Lease Disclosures

Financial reporting requirements that detail the specifics of lease agreements classified as capital leases, including future payment obligations and interest expenses.