Use of the Ratio Estimation Sampling Technique to Estimated Dollar

question 57

Multiple Choice

Use of the ratio estimation sampling technique to estimated dollar amounts is inappropriate when:

• A) the total book value is known and corresponds to the sum of all the individual book values.
• B) a book value for each sample item is unknown.
• C) there are some observed differences between audited values and book values.
• D) the audited values are nearly proportional to the book values.

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Definitions:

Labor Quantity

The amount of labor required or used in the production process, often measured in terms of hours or labor units.

Standard Cost

A predetermined cost of manufacturing, servicing, or marketing goods, used as a benchmark to measure performance.

External Financial Statement Reporting

The process of preparing and disclosing financial statements to external stakeholders, such as investors, creditors, and regulatory bodies, to provide insight into a company's financial health.

Generally Accepted Accounting Principles

A set of rules and standards for financial reporting that companies in the U.S. must adhere to.