Question

In performing a review of a client's cash disbursements, an auditor uses systematic sample selection with a random start. The primary disadvantage of this technique is population items :

Answer 1

The primary disadvantage of using systematic sample selection with a random start in auditing is the potential for periodicity bias, where the sampling interval may align with a pattern in the population, leading to an unrepresentative sample and potential bias in the results.

Step-by-step explanation:

In performing a review of a client's cash disbursements, an auditor uses systematic sample selection with a random start. The primary disadvantage of this technique is that population items may be clustered in a pattern that the systematic selection inadvertently aligns with, leading to an unrepresentative sample. This sampling method can lead to bias if the sampling interval corresponds with a certain pattern within the population. For example, if a pattern occurs every 10th entry in the client's ledger and the auditor samples every 10th voucher starting from a random point, they might pick up only those particular transactions aligned with the pattern, missing out on a broader range of cash disbursements. This is known as the risk of a periodicity bias and is a significant disadvantage of systematic sampling when compared to other methods like simple random sampling, where each sample has an equal chance of being chosen.