Romo,CPA performed nonstatistical sampling to examine the inventory balances of Jones Company.The sample included 125 of the total 1,250 items with a recorded value of $550,000.Romo determined the expected misstatement to be $25,000 and the tolerable misstatement to be $40,000.The sample had a recorded value of $54,000 and an audited value of $52,000.What conclusion did Romo draw regarding the account balance?
A) Conclude that the account balance is fairly stated, since the estimated misstatement is greater than the expected misstatement.
B) Conclude that the account balance is not fairly stated, since the estimated misstatement is greater than the tolerable misstatement.
C) Conclude that the account balance is not fairly stated, since the estimated misstatement is less than the expected misstatement.
D) Conclude that the account balance is fairly stated, since the estimated misstatement is less than the tolerable misstatement.

Question

Quizplus · Accepted Answer

The estimated misstatement ($2,000) is less than the tolerable misstatement ($40,000), so the account balance is considered fairly stated.

Romo,CPA Performed Nonstatistical Sampling to Examine the Inventory Balances of Jones