In the past,the auditors have found that the book value of a receivable account has been related to the amount the account is misstated (i.e. ,large accounts have large misstatements and small accounts have small misstatements).Which of the following techniques is most likely to be efficient?
A)Mean-per-unit estimation.
B)Ratio estimation.
C)Difference estimation.
D)Sequential sampling estimation.

Question

Quizplus · Accepted Answer

Since the auditors have found a correlation between the book value and misstatement amount, ratio estimation, which uses the relationship between the misstatement and the book value of the account, is likely to be the most efficient technique to estimate the misstatement amount. Mean-per-unit estimation, difference estimation, and sequential sampling estimation do not take the size of the account into consideration, and may not produce accurate results in this scenario.

In the Past,the Auditors Have Found That the Book Value