A Primary Difference in Comparing the Resulting Misstatements Analyzed After

question 103

Multiple Choice

A primary difference in comparing the resulting misstatements analyzed after using statistical methods compared to those using non-statistical methods is that

• A)statistical methods determine the most likely misstatement while nonstatistical methods determine misstatements by projecting the misstatement found in the sample back to the population.
• B)statistical methods determine misstatements by projecting the misstatement found in the sample back to the population while nonstatistical methods determine the most likely misstatement.
• C)statistical methods take a multiple of the estimated misstatement while nonstatistical methods use precision to determine the upper limit.
• D)statistical methods ignore any sampling error as the probabilities have compensated for them while nonstatistical methods must utilize the sampling error in the projection of the upper limit.

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Definitions:

Revenue Recognition

Revenue recognition is the accounting principle governing when revenue is considered earned and can be recorded.

Expense Recognition Principle

An accounting principle that expenses should be recognized and recorded at the time they are incurred, not necessarily when cash is paid.

Recognition Principle

An accounting concept dictating that revenue should be recognized in the income statement when it is realized or realizable and earned, not necessarily when cash is received.

Time Period Principle

An accounting principle stating that financial reporting should be done in regular intervals to ensure relevance and reliability.