Law,CPA is using nonstatistical sampling in his examination of Jye Company's accounts receivable.The recorded balance of Jye's accounts receivable was $750,000.Law selected a sample of customer accounts for examination,which were recorded at $50,000.Based on the responses received from accounts receivable confirmations,Law determined an audited value of $45,000 for the accounts receivable. If tolerable misstatement is $60,000,which of the following statements is not true?
A) The actual misstatement identified by Law is $5,000.
B) The estimated account balance would be $825,000.
C) Law would conclude that the account balance is not fairly stated, since the estimated misstatement is greater than the tolerable misstatement.
D) Law is not able to provide a quantitative conclusion as to the exposure to the risk of incorrect acceptance.

Question

Quizplus · Accepted Answer

The estimated account balance would be $675,000, not $825,000. The misstatement found in the sample is projected to the entire population, leading to a lower estimated account balance.

Law,CPA Is Using Nonstatistical Sampling in His Examination of Jye