MES Is Auditing a Client's Accounts Receivable Balance Recorded at $2

question 56

Multiple Choice

MES is auditing a client's accounts receivable balance recorded at $2 million using MUS sampling.The following parameters have been established for this account: • Tolerable misstatement = $200,000
• Expected misstatement = $100,000
• Risk of incorrect acceptance = 5%
Which of the following statements would not be true with respect to the sample size in this situation?

• A) The correct sample size is 116 customer accounts.
• B) Increasing tolerable misstatement from $200,000 to $600,000 (holding all other factors constant) will increase the sample size.
• C) If MES can accept a risk of incorrect acceptance of 10% (holding all other factors constant), sample size will be decreased to 80 accounts.
• D) Because the size of the population is relatively large, this element does not affect sample size.

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Definitions:

Financial Statements

A collection of reports about an organization's financial results, financial position, and cash flows.

Regulatory Agencies

Government or authorized bodies that oversee and enforce standards and regulations in specific industries to ensure compliance and protect public interests.

Compensation Recovery

The process of reclaiming funds from employees, especially executives, usually due to non-compliance with contracts or in cases of restatement of financials due to misreporting.

Incentive Payments

Payments or bonuses provided to employees or executives beyond their regular salaries, often tied to performance goals or achievements.