A Senior Manager Asks the Chief Audit Executive (CAE) to Explain

question 71

Multiple Choice

A senior manager asks the chief audit executive (CAE) to explain why statistical sampling is the best method to use in conducting an internal audit. Which advantages should the CAE point to in order to justify the internal audit activity's (IAA) use of statistical sampling?

• A) Statistical sampling sets limits on resources used for the IAA, allows for a subjective interpretation of the IAA's sampling results, and supports The Institute of Internal Auditors' requirements for using questionnaires as a sampling tool.
• B) Statistical sampling allows for evaluation of all organizational data at once, increases the likelihood that risks are immediately identified, and does not require a level of tolerable misstatement or margin of error.
• C) Statistical sampling allows for the selection of a minimum sample size, provides a quantitative expression of the IAA's sampling results, and supports extrapolation.
• D) Statistical sampling itself identifies root causes of issues, utilizes a qualitative method for analyzing results, and supports engagement objectives through the use of external benchmarking.

---

Definitions:

Chi-Square Values

Statistical measures used in hypothesis testing, especially to determine whether categorical variables are independent.

Interval Estimation

A range of values, calculated from sample data, that is likely to contain the value of an unknown population parameter.

Test Statistic

A value, derived from sample data, used in hypothesis testing to determine whether to reject the null hypothesis.

Sample Standard Deviation

A measure of the variability or dispersion of a sample data set, quantifying the extent to which the numbers vary from the sample mean.