AUDIT QUESTION

The use of statistical sampling techniques in an audit of financial statements does not eliminate judgmental decisions.

Required

a. Identify and explain four areas in which judgment may be exercised by a CPA when planning a statistical sampling for testing the existence of inventory.

b. Assume that a CPAs sample shows two differences between inventory counted in the sample and the inventory recorded on the books for those items. Describe the various actions that he or she may take based on this finding.

c. A nonstratified sample of 80 accounts payable vouchers is to be selected from a population of 3,200. The vouchers are numbered consecutively from 1 to 3,200 and are listed, 40 to a page, in the voucher register. Describe two different techniques for selecting a sample of vouchers for substantive tests of transactions.