Question

Which of the following would most likely be an advantage in using classical variables sampling rather than monetary-unit sampling?

a) Inclusion of zero and negative balances generally does not require special design considerations.
b) Any amount that is individually significant is automatically identified and selected.
c) An estimate of the standard deviation of the population's recorded amounts is not required.
d) The auditor rarely needs the assistance of a computer program to design an efficient sample.

Answer 1

Classical variables sampling's advantage over monetary-unit sampling is the straightforward inclusion of zero and negative balances and not requiring a priori estimation of the population's standard deviation for the sample design.

Step-by-step explanation:

An advantage of using classical variables sampling over monetary-unit sampling would likely be that the inclusion of zero and negative balances generally does not require special design considerations. This is because classical variables sampling treats all items in the population as separate units to be sampled without giving additional weight to larger value items, as is the case with monetary-unit sampling where higher value items have a higher chance of being selected. Additionally, when using classical variables sampling, the estimate of the standard deviation is built into the method through the analysis of the actual sampled items, hence an a priori estimate is not necessary. This contrasts with monetary-unit sampling that often requires a good estimate of the population's value standard deviation to design and evaluate the sample.