CPA · Question 74 · Area III: Performing Procedures
An auditor is performing an audit of a nonissuer. The auditor uses a classical variables sampling plan (mean-per-unit) to estimate the value of inventory. The recorded book value is $2,000,000. The point estimate of the population is $1,800,000. The precision (allowance for sampling risk) is $150,000. The tolerable misstatement is $250,000. What is the auditor's conclusion?
Answer options:
Accept the book value as fairly stated.
Reject the book value because it falls outside the acceptable range.
Accept the book value because the difference ($200,000) is less than tolerable misstatement ($250,000).
Increase the sample size.
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