Auditors Prefer to Use Probabilistic Sample Selection Methods for Nonstatistical

question 32

True/False

Auditors prefer to use probabilistic sample selection methods for nonstatistical sample applications involving tests of controls and substantive tests of transactions to improve the likelihood of selecting a representative sample.

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Definitions:

Diminishing Returns

A principle stating that adding an additional factor of production results in smaller increases in output.

Marginal Product

The additional output resulting from the use of one more unit of a factor of production.

Labor

Human effort used in the production of goods and services.

Perfect Competition

A market structure characterized by a large number of small firms, identical products sold by all firms, no barriers to enter or exit the market, and perfect knowledge of prices and technology.