Question

The accounts receivable file contains a large number of small monetary balances and a small number of large monetary balances, and the auditor expects to find numerous errors in the account balances. The most appropriate sampling technique to estimate the monetary amount of errors is

A. Difference or ratio estimation.
B. Unstratified mean-per-unit.
C. Attribute.
D. Probability-proportional-to-size.

Answer 1

The most appropriate sampling technique to estimate the monetary amount of errors in the accounts receivable file is Probability-proportional-to-size (PPS). PPS sampling involves selecting items for the sample based on their monetary value, giving more weight to larger balances.

Step-by-step explanation:

The most appropriate sampling technique to estimate the monetary amount of errors in the accounts receivable file is Probability-proportional-to-size (PPS).

PPS sampling is a technique that involves selecting items for the sample based on their monetary value. In this case, since the accounts receivable file contains both small and large balances, PPS sampling would be ideal because it would give more weight to the larger balances, which are expected to have a higher chance of errors.

This technique would allow the auditor to estimate the overall monetary amount of errors in the accounts receivable file based on a representative sample of balances.