Auditors Are Evaluating an Account with a Recorded Balance of $700,000

question 11

Multiple Choice

Auditors are evaluating an account with a recorded balance of $700,000 using classical variables sampling.Based on an allowable risk of incorrect acceptance of 10%,the auditors have determined the following: • Estimated account balance = $640,000
• Precision = $20,000
• Tolerable misstatement = $50,000
Which of the following best describes the auditors' decision and rationale for that decision?

• A) The auditors would accept the account balance as fairly stated, since the sample estimate falls outside of the precision interval.
• B) The auditors would conclude that the account balance is not fairly stated, since the sample estimate falls outside of the precision interval.
• C) The auditors would accept the account balance as fairly stated, since the difference between the upper bound of the precision interval and recorded balance is less than the tolerable misstatement.
• D) The auditors would conclude that the account balance is not fairly stated, since the difference between the lower bound of the precision interval and recorded balance exceeds the tolerable misstatement.

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Definitions:

Pharaoh

An ancient Egyptian king.

New Kingdom

A period in ancient Egyptian history, characterized by the country's reunification and expansion as well as flourishing arts and architecture.

Axial

Pertaining to or forming an axis; often used in architecture and art to describe symmetrical or central alignment.

Temples

Sacred buildings dedicated to worship and religious or spiritual rituals, often significant in various religious traditions.