Which of the Following Statements Best Describes an Inherent Limitation

question 45

Multiple Choice

Which of the following statements best describes an inherent limitation of the monetary-unit sampling method?

• A)It can only be used for substantive testing of asset accounts.
• B)It requires the use of a computer system to perform the required calculations.
• C)Misstatement rates must be large and the misstatements must be overstatements.
• D)Misstatement rates must be small and the misstatements must be overstatements.

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Definitions:

Discount

The reduction applied to the face value of a bond or the lower than market price of an asset.

Par Value

The face value of a bond or stock as stated by the issuing company, which may differ from its market value.

Market Rate

The prevailing price or interest rate available in the marketplace for goods, services, or securities.

Coupon Rate

The coupon rate is the annual interest rate paid by a bond relative to its face value, expressed as a percentage.