Question

An auditor is trying to determine the sample size for an inventory observation using classical variables (difference) estimation. To calculate required sample size, the auditor usually has to take into account:

A. Variability in the dollar amount of inventory
B. Tolerable error
a) A but not B
b) B but not A
c) Neither A nor B
d) Both A and B

Answer 1

The auditor needs to consider both the variability in the dollar amount of inventory and the tolerable error when determining the sample size for an inventory observation.

Step-by-step explanation:

In order to determine the sample size for an inventory observation using classical variables (difference) estimation, the auditor needs to take into account both variability in the dollar amount of inventory (option A) and the tolerable error (option B). Both options A and B are relevant for calculating the required sample size.