ExpertHard1 markMultiple Choice
CPA · Question 74 · Area III: Procedures
An auditor is using 'stratification' in a sampling application for accounts receivable. The primary objective of stratification is to:
An auditor is using 'stratification' in a sampling application for accounts receivable. The primary objective of stratification is to:
Answer options:
A.
Ensure every item has an equal chance of selection.
B.
Reduce the effect of high variability in the population, thereby reducing the required sample size.
C.
Eliminate the need for professional judgment.
D.
Test controls more efficiently.
How to approach this question
Stratification = Grouping. Why group? To handle big and small items differently. Reduces variance -> Reduces Sample Size.
Full Answer
B.Reduce the effect of high variability in the population, thereby reducing the required sample size.✓ Correct
Reduce the effect of high variability in the population, thereby reducing the required sample size.
Stratification involves dividing a population into subpopulations (strata) with similar characteristics (e.g., high value vs low value). This reduces the variability (standard deviation) within each stratum, allowing the auditor to achieve the same level of precision with a smaller total sample size.
Common mistakes
Thinking stratification is about equal probability (it's often about focusing on high value).
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