An Auditor Decides That It Is Important and Necessary to Observe

question 8

Multiple Choice

An auditor decides that it is important and necessary to observe a client's distribution of payroll cheques on a particular audit. The client organisation is so large that the auditor cannot conveniently observe the distribution of the entire payroll. In these circumstances, which of the following is most acceptable to the auditor?

• A) Observation should be made for all departments regardless of the inconvenience.
• B) Observation should be limited to one or more selected departments.
• C) Observation should be limited to those departments where employees are readily available.
• D) Observation should be eliminated and other alternative auditing procedures should be utilised to obtain satisfaction.

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Definitions:

Nominal Data

Data classified into categories that cannot be ordered or ranked.

Proportional Slice

A proportional slice refers to a segment of a whole, such as in a pie chart, where each slice’s size represents its proportion in relation to the total.

Nominal Data

Data that are categorized into distinct groups and names, without any order or ranking.

Frequency Distribution

A table or graph that displays the frequency of various outcomes in a sample.