When Determining the Sample Size for the Number of Items

question 80

Multiple Choice

When determining the sample size for the number of items the auditor should count during the physical inventory:

• A)it is easy to quantify the number of items based on a formula developed by the AICPA.
• B)one of the key determinants that must be considered is internal control over the physical count.
• C)one of the key determinants that must be considered is the time involved.
• D)generally accepted auditing standards require that at least 80% of the dollar value of the inventory should be included in the sample.

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Definitions:

Beginning Balance

The amount of funds or value of an account at the start of a new financial period.

Cash Account

An account in a brokerage or financial statement that shows the amount of cash available for transactions.

Cash Payments

Monetary transactions involving the outflow of cash to settle debts, purchase goods, or acquire services.

Bank Statement Balance

The ending balance on a bank statement for a particular period, reflecting all transactions including deposits, withdrawals, fees, and interest earned.