You are assigned to audit accounts payable for a manufacturing client. As part of the planning, your manager sets a tolerable misstatement amount of+/- $125,000. Your review of unpaid invoices indicates an understatement error of $25,253 from a sample of $675,467. The population value of A/P is $5,241,687 at October 31st. The estimate of true balance(rounded) is:
A) $5,398,938.
B) $5,266,940.
C) $5,391,940.
D) $5,241,940.

Question

Quizplus · Accepted Answer

The tolerable misstatement is +/- $125,000. The sample understatement error is $25,253. The population value of A/P is $5,241,687. The estimate of true balance is $5,241,687 + $25,253 = $5,266,940. This is within the tolerable misstatement, so the correct answer is A.

You Are Assigned to Audit Accounts Payable for a Manufacturing