If the Size of the Sample to Be Used in a Particular

question 7

Multiple Choice

If the size of the sample to be used in a particular test of controls has not been determined by utilising statistical concepts, but the sample has been chosen in accordance with random selection procedures:

• A) the auditor has committed a non-sampling error.
• B) no inferences can be drawn from the sample.
• C) the auditor will have to evaluate the results by reference to the principles of discovery sampling.
• D) the auditor may or may not achieve desired precision at the planned level of assessing control risk too low.

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Definitions:

Cash Flow Hedge

A type of hedge that is used to manage exposure to variability in cash flows, typically associated with forecasted transactions that might affect profit or loss.

Forward Contract

A bespoke pact between two parties for the buying or selling of an asset at a set price on an agreed future date.

Gross Method

A method of recording purchases at the gross invoice amount before any trade discounts are subtracted.

Hedging

A strategy used in financial management to offset potential losses or gains that may be incurred by a companion investment, thereby reducing the risk of adverse price movements.