Define stratified sampling, and explain its importance in auditing. How could an auditor obtain a stratified sample of 30 items from each of three strata in the confirmation of accounts receivable?

Part II The separation of operational responsibility from record keeping is meant to prevent different types of misstatements from those covered by the separation of the custody of assets from accounting. Required: Give an example to explain the difference in the purposes of these two types of separation of duties. (8 marks)

Part III The auditor of Fergusons Ltd identified two internal controls in the sales and collection receipts cycle for testing. In the first control, the computer verifies that a planned sale on account will not exceed the customers credit limit entered in the accounts receivable master file. In the second control, the accounts receivable clerk matches bills of lading, sales invoices and customer orders before recording in the sales journal. Required: How do each of the above affect the auditors testing? (8 marks)