Economics · Auditing
You are analysing the sample selection with regard to direct confirmation of accounts receivable. Which of the following statements in relation to focusing only on the ten largest balances is TRUE?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The sample selection does not address the risk of understatement as it has focused only on the ten largest balances.✓
- 2As 15% of the ledger balance has not been sampled, the sample is entirely inappropriate.
- 3The sample is appropriate and, at 85% of the balance, gives good assurance about the overall balance.
- 4The sample should have been stratified to ensure no smaller balances are selected.
Correct answer
The sample selection does not address the risk of understatement as it has focused only on the ten largest balances.
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