SCA Is Auditing a Client's Accounts Receivable Balance Recorded at $10

question 15

Multiple Choice

SCA is auditing a client's accounts receivable balance recorded at $10 million using MUS.The following parameters have been established for this account: -Tolerable misstatement = $500,000
-Expected misstatement = $100,000
-Risk of incorrect acceptance = 10 percent
Which of the following statements would not be true with respect to the sample size in this situation?

• A)The correct sample size is 69 customer accounts.
• B)Decreasing tolerable misstatement from $500,000 to $200,000 (holding all other factors constant)will reduce the sample size by 331 accounts.
• C)If SCA wishes to reduce its exposure to the risk of incorrect acceptance to 5 percent (holding all other factors constant),sample size will be increased by 24 accounts.
• D)Increasing expected misstatement to $200,000 (holding all other factors constant)will increase the sample size to 115 customer accounts.

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Definitions:

Net Benefit

The positive difference between all benefits received from a particular action or project after subtracting all associated costs.

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Advantages or favorable outcomes associated with a particular action, job, or situation, often related to employment or health.

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The expenses associated with acquiring or producing goods, services, or undertaking any business activity.

Monetary Values

The financial worth assigned to goods, services, or assets, expressed in terms of currency.