The Formula for Nonstatistical Sampling for Tests of Account Balances

question 50

Multiple Choice

The formula for nonstatistical sampling for tests of account balances provided by the AICPA

• A) must be used for nonstatistical sampling.
• B) includes a provision for the risk of incorrect acceptance.
• C) is affected by the nature of other substantive procedures used to test the account balance.
• D) is largely based on the variation of items in the account.

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Definitions:

Marginal Tax Rate

The rate at which an additional dollar of income is taxed, showing the percentage of tax applied to your next dollar of taxable income.

Average Tax Rate

Total tax paid divided by total taxable income or some other base (such as total income) against which to compare the amount of tax paid. Expressed as a percentage.

Progressive Tax

At the individual level, a tax whose average tax rate increases as the taxpayer’s income increases. At the national level, a tax for which the average tax rate (= tax revenue/GDP) rises with GDP.

Exhaustive Governmental Outlay

Total government spending on goods and services that are directly consumed or invested, excluding transfer payments such as subsidies or social security benefits.