An auditor wishes to estimate inventory shrinkage by weighing a sample of inventory items.From experience,the auditor knows that a few specific items are subject to unusually large amounts of shrinkage.In using statistical sampling,the auditor's best course of action is to:
A)Eliminate any of the items known to be subject to unusually large amounts of shrinkage.
B)Increase the sample size to lessen the effect of the items subject to unusually large amounts of shrinkage.
C)Stratify the inventory population so that items subject to unusually large amounts of shrinkage are reviewed separately.
D)Continue to draw new samples until a sample is drawn which includes none of the items known to be subject to large amounts of shrinkage.

Question

Quizplus · Accepted Answer

Stratifying the inventory population allows the auditor to review items subject to unusually large amounts of shrinkage separately, ensuring they get adequate attention while not biasing the overall estimate of inventory shrinkage. This approach allows for a representative sample to be taken, increasing the reliability of the estimate. Eliminating or continually re-sampling until certain items are not included could result in biased estimates, while increasing the sample size may be unnecessary and time-consuming.

An Auditor Wishes to Estimate Inventory Shrinkage by Weighing a Sample