Which of the Following Statements Is True About the Determination

question 12

Multiple Choice

Which of the following statements is true about the determination whether to use statistical attribute sampling or nonstatistical sampling?

• A) Statistical attribute sampling is usually the best way to select exception reports to test the effectiveness of the manual followup procedure.
• B) For controls that function infrequently, such as controls over management discretion in financial reporting that occur only quarterly, nonstatistical sampling is probably the most efficient way to determine how often the auditor wants to test the effectiveness of the control.
• C) Nonstatistical sampling is most effective for larger populations.
• D) Statistical sampling has become the norm for tests of controls.
• E) Statistical sampling should always be used in tests of general controls, such as inspecting logs that document program changes, were the auditor wants to review the entire population but uses sampling to choose specific items to investigate a sample of the individual items.

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Definitions:

Direct Labor

The labor costs directly associated with the manufacture of specific goods or services, which can be easily traced to a product.

Factory Overhead

Factory Overhead includes all indirect costs associated with the manufacturing process, such as utilities, maintenance, and manager salaries, not directly tied to production output.

Process Manufacturing

A production method used in industries such as chemical, food, and pharmaceuticals, where goods are produced in continuous, batch processes rather than discrete units.

Unique Items

Products or goods that are distinct in characteristics or are produced in small quantities, making them rare or uncommon.