SCA Is Auditing a Client's Accounts Receivable Balance Recorded at $10

question 5

Multiple Choice

SCA is auditing a client's accounts receivable balance recorded at $10 million using MUS sampling.The following parameters have been established for this account: • Tolerable misstatement = $500,000
• Expected misstatement = $100,000
• Risk of incorrect acceptance = 10%
Which of the following statements would not be true with respect to the sample size in this situation?

• A) The correct sample size is 69 customer accounts.
• B) Decreasing tolerable misstatement from $500,000 to $200,000 (holding all other factors constant) will reduce the sample size by 331 accounts.
• C) If SCA wishes to reduce its exposure to the risk of incorrect acceptance to 5% (holding all other factors constant), sample size will be increased by 24 accounts.
• D) Increasing expected misstatement to $200,000 (holding all other factors constant) will increase the sample size to 115 customer accounts.

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Definitions:

Intra-Entity Transactions

Transactions that occur within the same legal entity, often between departments or divisions, which may require elimination during consolidation.