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

question 58

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 percent,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.

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Definitions:

Well-Being

The state of being comfortable, healthy, or happy, often considered a holistic measure of one's quality of life and mental and physical health.

Common Sense

The natural ability to make sound judgments and reasonable decisions based on practical life experience.

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Surgical procedures performed to enhance or alter one's appearance for aesthetic reasons rather than medical necessity.

Placebo Effect

The beneficial outcome resulting from a person's expectations of a treatment rather than from the treatment itself.