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

The internal auditor of Deccan Steel Ltd must test 400 inventory items, of which 20 high-value items make up most of the stock value and the rest are low-value. The auditor examines all 20 high-value items and a random sample from the remaining 380. Which technique is this?

This is stratified sampling. The auditor splits inventory into high-value and low-value strata, checks all 20 high-value items completely, and randomly samples the remaining 380. This focuses effort on the items carrying the greatest risk and value, unlike simple random sampling of the whole population.

  1. AStratified sampling with full coverage of the high-value stratumCorrect
  2. BSimple random sampling of the whole population
  3. CCluster sampling of one warehouse
  4. DHaphazard sampling without any basis

Explanation

The population is divided into strata by value; the high-value stratum is tested fully and the low-value stratum by random sampling. This is stratified sampling. Simple random sampling would not treat the 20 items separately.

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