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CMA Intermediate · Corporate Accounting and Auditing · Audit Sampling, Audit Techniques and Analytical Procedure

A company's receivables ledger holds 8,000 balances totalling Rs 40 crore. The auditor uses audit software to select every balance above Rs 5 lakh (240 balances totalling Rs 24 crore) for confirmation and then draws a random sample from the remaining balances. What proportion of the total value is covered by the 100% examination of the large items?

The large items cover 60% of the total value, calculated as Rs 24 crore divided by Rs 40 crore. The 3% figure reflects only the proportion of items by count, which is not the measure of value coverage asked for.

  1. A30%
  2. B50%
  3. C60%Correct
  4. D3%

Explanation

Value covered = 24 / 40 = 0.60, i.e. 60%. The 3% option confuses the item count (240/8,000) with value coverage. The 30% option would arise from comparing 240 with 800 items, which is not in the data.

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