The True Proportion of Accounts Receivable with Some Kind of Error

question 41

Multiple Choice

The true proportion of accounts receivable with some kind of error is 0.02 for Venal Enterprises.If an auditor randomly samples 50 accounts receivable,which is the Excel probability that fewer than two will contain errors?

• A)=BINOM.DIST(2,50,0.02,1)
• B)=BINOM.DIST(1,50,0.02,1)
• C)=BINOM.DIST(2,50,0.02,0)
• D)=BINOM.DIST(1,50,0.02,0)

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Definitions:

Over-Optimism

A bias where individuals or companies have excessively positive expectations about future events or outcomes.

Confirmation Bias

The inclination to seek out, comprehend, prefer, and remember information that validates one’s already held beliefs or theories.

Regret Aversion

A behavioral finance concept describing an individual's tendency to make decisions that minimize the potential for future regret.

Frame Dependence

A concept in behavioral finance where investors' decisions are influenced by the way information is presented to them, rather than just the information itself.