Auditors Are Evaluating an Account with a Recorded Balance of $600,000

question 33

Multiple Choice

Auditors are evaluating an account with a recorded balance of $600,000 using classical variables sampling.Based on an allowable risk of incorrect acceptance of 5%,the auditors have determined the following: • Estimated account balance = $680,000
• 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 lower bound of the precision interval and recorded balance exceeds 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.