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CS Professional · Internal and Forensic Audit · Internal Audit Tools and Techniques

At Himalaya Pharma Ltd, an internal auditor wants to estimate the total overstatement in a receivables ledger of 1,500 customer balances. A few balances are very large, while most are small. The auditor wants each rupee in the ledger to have an equal chance of selection, so that large balances are more likely to be chosen. Which technique fits best?

Monetary unit sampling is best, as it makes each rupee a sampling unit so large balances are more likely to be selected. This suits testing overstatement in a skewed ledger, unlike attribute sampling, haphazard selection or block selection.

  1. AMonetary unit samplingCorrect
  2. BAttribute sampling on the number of customers
  3. CHaphazard selection of small balances
  4. DBlock selection of consecutive accounts

Explanation

Monetary unit sampling treats each rupee as a sampling unit, so larger balances have proportionally higher selection probability, suited to testing overstatement. Attribute sampling estimates deviation rates in controls, haphazard selection has no probability basis, and block selection of consecutive accounts may miss large items.

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