Final answer:
An auditor may consider changing their sampling unit for accounts receivable confirmation to individual invoices, overdue balances only, or large account balances only, to target specific transactions or areas with potential risks, thereby creating a more efficient and precise audit process.
Step-by-step explanation:
In considering the case of an auditor who in previous years encountered numerous differences between recorded account balances and confirmation replies during the process of confirming clients' accounts receivable, a strategic change in the sampling unit can be a practical approach to reduce the time and effort required to resolve such non-error discrepancies.
For this year, the auditor might opt for a more targeted method of sampling to avoid the substantial amount of work needed to resolve these differences. The options provided are:
- Individual invoices: This can help in verifying specific transactions and might isolate and identify discrepancies at a granular level.
- Overdue balances only: Focusing on overdue balances can help prioritize potential risk areas, as they might indicate issues with billing or collection processes.
- Large account balances only: By concentrating on large account balances, the auditor can focus efforts where the financial impact is greatest, as errors or frauds in larger balances would have a more significant financial effect.
- Small account balances only: This approach could reduce the workload if small balances are less likely to have discrepancies; however, it might overlook significant cumulative errors.
Considering the auditor's previous experience, changing the sampling unit to either individual invoices, overdue balances only, or large account balances only could prove more efficient and accurate for audit purposes.