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:

Limited Liability

A legal structure for a business where the owners' personal assets are protected from the company's debts and liabilities.

Shareholders

Individuals or entities that own shares in a corporation, giving them certain rights such as voting on important company decisions.

Stockholders' Equity

Represents the owners' interest in a company, calculated as the difference between total assets and total liabilities.

Paid-In Capital

Paid-in capital is the amount of money investors have contributed to a company in exchange for equity.