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 it is within $15 000 of the actual balance. Using a variables sampling plan, you compute a 95 per cent 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.