Question:An auditor selects a sample using as a population the total value of receivables from a receivable population. The sample is selected on the following basis: one dollar is selected at random and deemed to be the starting point; individual dollars are then selected at consecutive fixed intervals of $10,000.
In respect of this form of sample selection which of the following statements is most accurate?
A. Such a basis of selection may be preferred when the book population under examination has a highly skewed value distribution.
B. Such a basis of sample selection is more suited to the detection of understatement errors than overstatement errors.
C. Such a basis of selection ensures that all errors in excess of $10,000 will be detected.
D. Such a basis of selection would be ineffective where errors occur in the population on a systematic basis.
The correct answer is: Such a basis of selection may be preferred when the book population under examination has a highly skewed value distribution.
The basis of selection ensures that items greater than $10,000 are picked for testing, not that errors greater than $10,000 would be detected.
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