Harvey Jones, CPA, Uses Statistical Sampling to Test Control Procedures

question 59

Multiple Choice

Harvey Jones, CPA, uses statistical sampling to test control procedures. What is a benefit of using statistical sampling?

• A)It provides a means of mathematically measuring the sampling risk that result from examining only a part of the data.
• B)It eliminates the use of judgment required of Jones because the AICPA has established numerical criteria for this type of testing.
• C)It increases Jones' knowledge of the entity's prescribed procedures and their limitations.
• D)It is required by generally accepted auditing standards.

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Definitions:

Stock Option

A derivative financial instrument that gives the holder the right to buy or sell a stock at a specified price before a certain date.

Time to Expiration

Time to expiration refers to the duration until the expiry date of a derivative contract, such as options or futures, impacting its value and the strategies of investors holding or trading it.

Time Value

The concept that money available at the present time is worth more than the same amount in the future, due to its potential earning capacity.

Call Option

A financial contract that gives the holder the right, but not the obligation, to buy a specified quantity of an underlying asset at a predetermined price before a specified date.