ExpertMedium1 markMultiple Choice
CPA · Question 74 · Area III: Performing Procedures
An auditor is using 'stratification' in sampling. What is the primary benefit of this technique?
An auditor is using 'stratification' in sampling. What is the primary benefit of this technique?
Answer options:
A.
It eliminates the need for professional judgment.
B.
It reduces the sample size required to achieve a specified precision and reliability.
C.
It allows the auditor to ignore small items.
D.
It is required for all statistical sampling applications.
How to approach this question
Stratification = Efficiency. Grouping similar items reduces variance -> reduces sample size.
Full Answer
B.It reduces the sample size required to achieve a specified precision and reliability.✓ Correct
It reduces the sample size required to achieve a specified precision and reliability.
Stratification reduces the effect of population variability (standard deviation). A lower standard deviation allows for a smaller sample size to achieve the same confidence level.
Common mistakes
Thinking it's about bias.
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