YChang,CPA,performed a Nonstatistical Sampling Plan to Examine the Inventory Balances

question 116

Multiple Choice

Y.Chang,CPA,performed a nonstatistical sampling plan to examine the inventory balances of PHD,Inc.In selecting the sample of 35 items,Chang used an expected misstatement of $20,000 and a tolerable misstatement of $32,000.The account balance consisted of 525 items totaling $600,000.The sample recorded value was $40,000,and the audited value was $38,000.What conclusion did Chang draw regarding the account balance?

• A) Accept because the estimated misstatement is less than the tolerable misstatement.
• B) Reject because the estimated misstatement is more than the expected misstatement.
• C) Accept because the estimated misstatement is less than the expected misstatement.
• D) Reject because the estimated misstatement is more than the tolerable misstatement.

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Definitions:

Unity-of-Command Principle

A principle in management stating that each employee should receive orders from only one superior to avoid confusion and conflict.

Too Many Bosses

A situation in which an employee is required to report to multiple supervisors, often leading to confusion and conflict.

Line of Authority

Refers to the formal hierarchy within an organization that dictates who has the power to make decisions and who reports to whom.

Strategic Orientation

An approach or planning framework that aligns an organization's resources and activities with its long-term goals and competitive environment.