ExpertACCA · Question 13 · Audit Evidence
SECTION A - CASE 3: AQUAPURE UTILITIES
AquaPure Utilities is a highly regulated public utility company managing water and waste services. You are auditing the financial statements for the year ended 31 March 20X6.
During the audit, you note the following:
- AquaPure has a large internal audit (IA) department that recently completed a review of the procurement controls.
- The billing system is highly automated, generating millions of micro-invoices based on smart meter readings.
- The company owns a vast network of underground water pipes, which are difficult to physically verify.
- You plan to use substantive analytical procedures to audit water revenue.
Question:
When sampling the underground water pipes for impairment testing, the auditor divides the pipes into groups based on their age (e.g., 0-10 years, 11-20 years, 20+ years). What is this sampling technique called, and what is its main benefit?
SECTION A - CASE 3: AQUAPURE UTILITIES
AquaPure Utilities is a highly regulated public utility company managing water and waste services. You are auditing the financial statements for the year ended 31 March 20X6.
During the audit, you note the following:
- AquaPure has a large internal audit (IA) department that recently completed a review of the procurement controls.
- The billing system is highly automated, generating millions of micro-invoices based on smart meter readings.
- The company owns a vast network of underground water pipes, which are difficult to physically verify.
- You plan to use substantive analytical procedures to audit water revenue.
Question:
When sampling the underground water pipes for impairment testing, the auditor divides the pipes into groups based on their age (e.g., 0-10 years, 11-20 years, 20+ years). What is this sampling technique called, and what is its main benefit?
Answer options:
Systematic sampling; it ensures every nth pipe is selected.
Random sampling; it eliminates all audit risk.
Stratified sampling; it reduces variability within subpopulations, potentially reducing sample size.
Block sampling; it allows the auditor to test pipes in the same geographic location.
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