The auditor has decided to use systematic selection of cash payments when testing the control that cheque payments are supported by a supplier's invoice, a purchase requisition and a goods received note. Each cheque comprises a sampling unit. There are 5000 cheques drawn (numbered 1-5000) and the total amount of cash payments is $10 million. The sample size is 20 and the random start is 127. Given this information, the second item selected will be item no:
A) Cheque number 5127.
B) Cheque number 627.
C) Cheque number 377.
D) Some other item number.

Question

Quizplus · Accepted Answer

The systematic selection method requires the auditor to select sampling units at regular intervals. To determine the interval, the auditor divides the total population by the desired sample size. In this case, the interval would be 250 (5000 divided by 20).

Next, the auditor selects a random start between 1 and the interval. In this case, the random start is 127. The first item selected would be cheque number 127, the second item selected would be cheque number 377 (250 + 127), the third item would be cheque number 627 (250 + 250 + 127), and so on.

Therefore, the correct answer is C) Cheque number 377.

The Auditor Has Decided to Use Systematic Selection of Cash