An Accounts Receivable Account Balance Is $500,000 and the Auditor

question 34

Multiple Choice

An accounts receivable account balance is $500,000 and the auditor determines a sample size of 30 would provide adequate assurance.The auditor plans to use a monetary-unit sampling plan with systematic sample selection.The auditor notices that there are six customer accounts of at least $15,000 and would like the systematic selection technique to select all items that are at least $15,000,even if that means the sample size is slightly larger than 30.To achieve the auditor's objectives,the sampling interval should be

• A) 6.
• B) 20.
• C) 16,666.
• D) 15,000.
• Typically the threshold would be $16,666 ($500,000/30), but in order to guarantee the selection of all items greater than $15,000, the sampling interval needs to be no greater than $15,000. While a sampling interval of $6 or $20 would also guarantee that all items greater than $15,000 are selected, such small intervals would be inefficient and result in a sample size much greater than 30.

---

Definitions:

Implied Repudiation

A situation where one party’s actions or inactions signal a refusal to fulfill their contractual obligations, suggesting an intention to breach the contract despite no explicit declaration.

Express Repudiation

The clear and unequivocal refusal to honor a contract or agreement, effectively declaring one's intention not to perform their contractual obligations.

Quantum Meruit

A legal principle allowing a party to recover costs for services provided when no contract exists, based on the reasonable value of the work.

Specific Performance

A legal remedy in contracts where the court orders the party who breached the contract to perform the promised action rather than simply paying damages.