If statistical sampling methods are used by a client in the taking of its physical inventory, the auditor must

Either observe a complete inventory count sometime during the year and be satisfied that the statistical procedures are valid or qualify or disclaim an opinion on the financial statements taken as a whole.

Observe such test counts as $($s$)$he deems necessary and be satisfied that the sampling plan has statistical validity, that it was properly applied, and that the resulting precision and reliability are reasonable in the circumstances.

Insist that the client take a complete physical inventory at least once each year and observe the inventory count if reasonable and practicable to do so$.$

Either observe a statistical inventory count each year or qualify or disclaim an opinion on the financial statements taken as a whole.