Law,CPA Is Using Nonstatistical Sampling in His Examination of Jye

question 87

Multiple Choice

Law,CPA is using nonstatistical sampling in his examination of Jye Company's accounts receivable.The recorded balance of Jye's accounts receivable was $750,000.Law selected a sample of customer accounts for examination,which were recorded at $50,000.Based on the responses received from accounts receivable confirmations,Law determined an audited value of $45,000 for the accounts receivable. If tolerable misstatement is $60,000,which of the following statements is not true?

• A)The actual misstatement identified by Law is $5,000.
• B)The estimated account balance would be $825,000.
• C)Law would conclude that the account balance is not fairly stated,since the expected misstatement is greater than the tolerable misstatement.
• D)Law is not able to provide a quantitative conclusion as to the exposure to the risk of incorrect acceptance.

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Definitions:

Stock

Shares of ownership in a corporation, representing a claim on part of its assets and earnings.

Investors

Individuals or entities that allocate capital with the expectation of receiving financial returns.

Income Statement

A financial report that outlines a company's revenues, expenses, and profits over a specific period, typically a quarter or year, to show its performance.

Market Value

The amount for which something can be sold on a given market.