The Client's Trial Balance Has a Balance of $410,000 for Merchandise

question 87

Multiple Choice

The client's trial balance has a balance of $410,000 for merchandise inventory.As the auditor you are willing to accept a balance that is within $20,000 of either side of the recorded balance.You compute a 95% confidence interval of $395,000 to $425,000.You could therefore:

• A)reject the trial balance amount.
• B)accept the trial balance amount.
• C)increase the sample size to assure more precision.
• D)use alternative audit procedures to satisfy yourself as to the correct balance.

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Definitions:

Unit Sales

The total number of individual units sold.

Net Operating Income

The total profit of a company after operating expenses are subtracted from operating revenues, but before taxes and interest are deducted.

Units

A measure of quantity, referring to the individual countable items or grouped quantities of a product.

Sales Commissions

Fees paid to salespersons for selling products or services, typically a percentage of the sale amount.