The Accounting Department Reports That the Balance of Accounts Receivable

Multiple Choice

The accounting department reports that the balance of accounts receivable is $210,000. You are willing to accept that balance if audit sampling suggests it is within $15,000 of the actual balance. Using a classical variables sampling plan, you compute a 95% confidence interval of $208,000 to $225,000. You would therefore:

A) not be able to determine the acceptability of the receivable balance.
B) accept the balance but with a lower level of confidence.
C) take a larger sample before totally rejecting the balance and requiring adjustments.
D) accept the $210,000 balance because the confidence interval is within the materiality limits.