An Auditor Established a $60,000 Tolerable Misstatement for an Account

question 53

Multiple Choice

An auditor established a $60,000 tolerable misstatement for an account balance of $1,000,000.The auditor selected a sample of every twentieth item from the population of 1,000 items that represented the asset account balance and discovered overstatements of $3,700 and understatements of $200.Under these circumstances,the auditor most likely would conclude that

• A) There is an unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement because the total projected misstatement is more than the tolerable misstatement.
• B) There is an unacceptably high risk that the tolerable misstatement exceeds the sum of actual overstatements and understatements.
• C) The asset account is fairly stated because the total projected misstatement is less than the tolerable misstatement.
• D) The asset account is fairly stated because the tolerable misstatement exceeds the net of projected actual overstatements and understatements.

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Definitions:

Vote With Their Feet

The concept that people show their preferences or dissatisfaction with a situation by leaving an area or opting out of a system.

Free-Rider Problem

A situation where individuals consume more than their fair share of a public resource, or shoulder less of the cost of its production, benefiting from a good without properly paying for it.

Street Performers

Individuals who entertain the public in outdoor locations, often relying on voluntary donations for income.

Median Voter

A theoretical concept that represents the individual whose preferences are exactly in the middle of the set of all voters' preferences, often used in political science to predict the outcome of elections.