Auditors Are Evaluating an Account with a Recorded Balance of $700,000

question 11

Multiple Choice

Auditors are evaluating an account with a recorded balance of $700,000 using classical variables sampling.Based on an allowable risk of incorrect acceptance of 10 percent,the auditors have determined the following: -Estimated account balance = $640,000
-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 upper bound of the precision interval and recorded balance is less than 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:

Aversive Reactions

Aversive Reactions are negative responses, either physical or psychological, to a stimulus that an individual finds unpleasant or noxious.

Primary Reinforcer

An innately satisfying stimulus, such as food or warmth, that does not require any learning to become desirable.

Salient

Referring to something that is prominent, significant, or conspicuous in a particular context.

Extinction

In behavioral psychology, the gradual weakening and eventual disappearance of a conditioned response when the reinforcement is no longer offered.