The accounting department reports the accounts receivable balance as $175,000.You are willing to accept that balance if it is within $15,000 of the actual balance.Using a variables sampling plan, you compute a 95% confidence interval of $173,000to $187,000. You would therefore(1) find it impossible to determine the acceptability of the balance.(2) accept the balance but with a lower level of confidence.(3) take a larger sample before rejecting the sample and requiring adjustments.(4) accept the $175,000 balance because the confidence interval is within themateriality limits.
The accounting department reports the accounts receivable balance as $175,000.You are willing to accept that balance if it is within $15,000 of the actual balance.Using a variables sampling plan, you compute a 95% confidence interval of $173,000to $187,000. You would therefore(1) find it impossible to determine the acceptability of the balance.(2) accept the balance but with a lower level of confidence.(3) take a larger sample before rejecting the sample and requiring adjustments.(4) accept the $175,000 balance because the confidence interval is within themateriality limits.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The accounting department reports the
You are willing to accept that balance if it is within $15,000 of the actual balance.
Using a variables sampling plan, you compute a 95% confidence interval of $173,000
to $187,000. You would therefore
(1) find it impossible to determine the acceptability of the balance.
(2) accept the balance but with a lower level of confidence.
(3) take a larger sample before rejecting the sample and requiring adjustments.
(4) accept the $175,000 balance because the confidence interval is within the
materiality limits.
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