The Major Reason That the Difference and Ratio Estimation Methods

question 13

Multiple Choice

The major reason that the difference and ratio estimation methods would be expected to produce audit efficiency is that the:

• A) beta risk may be completely ignored.
• B) variability of the populations of differences or ratios is less than that of the populations of book values or audited values.
• C) number of members of the populations of differences or ratios is smaller than the number of members of the population of book values.
• D) calculations required in using difference or ratio estimation are less arduous and fewer than those required when using direct estimation.

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Definitions:

Physical Count

Physical count refers to the actual counting of inventory items in a warehouse or store to verify stock levels.

Depreciation

An approach to apportioning the value of a tangible resource over the period it is expected to be used.

Market Value

The current price at which an asset or service can be bought or sold in the marketplace, which can fluctuate based on supply and demand dynamics.

Adjusted Trial Balance

A financial report that lists all accounts and their balances after adjustments have been made, ensuring the total debits equal the total credits.