You Are Testing Controls Over Accounts Receivable and Are Determining

question 116

Multiple Choice

You are testing controls over accounts receivable and are determining if the appropriate credit authorization was made by an authorized person. Your sample size is 40 and your computed upper deviation rate is 5%. On the first 10 items sampled you have found 8 deviations. You would most likely:

• A) continue with the other 30 items.
• B) revisit the sample size calculations.
• C) increase the tolerable deviation rate.
• D) stop the test and re-set control risk for accounts receivable.

Acquire knowledge on the financial accounting implications of equipment exchanges with and without commercial substance.

Learn about the accounting for natural resources, including the concept of depletion.

Incorporate the concept of gains, losses, and the book value in the financial reporting and disposal of fixed assets.

Understand how to calculate the cost basis of assets, including both new and used machinery.

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Definitions:

Compromise

An agreement or settlement reached by each party making concessions.

Economic

Pertaining to the production, distribution, and use of income, wealth, and commodities.

Unalienable Rights

Unalienable rights are fundamental freedoms that are considered inherent to all human beings, which cannot be surrendered or transferred; they include life, liberty, and the pursuit of happiness.

Laissez-faire Capitalism

An economic system in which transactions between private parties are free from government intervention, including regulations, privileges, tariffs, and subsidies.