Which of the following courses of action would an auditor most likely follow in planning a sample of cash disbursements if the auditor is aware of several unusually large cash disbursements?

Question

Quizplus · Accepted Answer

Choice "B" is correct. Stratification involves the grouping of transactions sharing some characteristic (such as recorded amounts). The goal of stratification is to ensure selection of items for which potential misstatements may individually equal or exceed tolerable misstatement. Thus, the auditor should stratify the sample such that the unusually large transactions are selected. Choice "A" is incorrect. The tolerable rate of deviation refers to test of controls, rather than substantive tests. Choice "C" is incorrect. Certain items should be individually examined; for example, the auditor should examine those items for which potential misstatements may individually equal or exceed tolerable misstatement. Stratifying the sample is more efficient than increasing the sample size. Choice "D" is incorrect. By stratifying the sample, the auditor can examine each of the unusual transactions and also reduce the sample size.

Which of the Following Courses of Action Would an Auditor