[Anonymous]

An auditor is performing substantive tests of pricing and extensions of perpetual inventory balances consisting of a large number of items. Past experience indicated numerous pricing and extension errors. Which of the following statistical sampling approaches is most appropriate?

A.

Unstratified mean-per-unit

Incorrect B.

Probability-proportional-to-size

C.

Stop-or-go

D.

Ratio estimation

D. Ratio estimation sampling is based on ratios between audited amounts and recorded amounts. This approach is most efficient when the ratio is not equal to one.

Since there are numerous errors in pricing and extensions in this case, ratio estimation would result in numerous usable results that would produce the most precise evaluation.

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I looked up the definition of ratio sampling and PPS. Aren’t they the same thing?

[NoraU]

No, ratio is a variation of classical variables sampling.

BEC 05/12/14 77
REG 08/25/14 82
FAR 11/25/14 80
AUD 02/25/15 72, 05/15/15 98! DONE!!!!!!!!!!!!!!!!!!!!!!

[Author]

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