An Advantage of Using Statistical Over Nonstatistical Sampling Methods in Tests

question 99

Multiple Choice

An advantage of using statistical over nonstatistical sampling methods in tests of controls is that the statistical methods:

• A) Can more easily convert the sample into a dual-purpose test useful for substantive testing.
• B) Eliminate the need to use judgment in determining appropriate sample sizes.
• C) Afford greater assurance than a nonstatistical sample of equal size.
• D) Provide an objective basis for quantitatively evaluating sample risk.

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Definitions:

Shutting Down

The short-run decision by a firm to cease production due to market conditions, though it may resume operations in the future.

Variable Cost

Costs that vary in proportion to the level of production or business activity.

Total Revenue

The full amount of income generated by the sale of goods or services before any expenses are subtracted.

AVC Curve

The Average Variable Cost (AVC) Curve graphically represents how the cost per unit changes as the level of output is altered, typically showing a U-shaped curve due to economies and diseconomies of scale.