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.

Interpret the financial implications of unearned and accrued revenues.

Understand the purpose and process of preparing adjusted and unadjusted trial balances.

Identify and explain the impact of different types of adjustments (accruals, deferrals, depreciations) on financial statements.

Perform vertical analysis of financial statements to analyze changes over time.

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Definitions:

Cytokinesis

The method by which a single eukaryotic cell's cytoplasm is split into two, resulting in the formation of two offspring cells during cell division.

Telophase

The final stage of cell division, in which the chromosomes de-condense, nuclear envelopes reform, and cytokinesis usually begins.

Spindle Microtubules

Filaments composed of tubulin that form the spindle apparatus during cell division, playing a vital role in the separation of chromosomes.

Kinetechores

Kinetechores refer to protein complexes on chromatids where the spindle fibers attach during cell division, playing a crucial role in chromosome movement.