A review of an organization's balance sheet for material transactions and an application review of the program that produced the balance sheet would use which of the following sampling methods?
A review of an organization's balance sheet for material transactions and an application review of the program that produced the balance sheet would use which of the following sampling methods?
Variable sampling is the appropriate method for reviewing an organization's balance sheet for material transactions and conducting an application review of the program that produced the balance sheet. Variable sampling is typically applied to tests of monetary or quantitative amounts and helps in identifying significant misstatements in stated amounts. This aligns well with the objectives of reviewing material transactions and program applications that impact the balance sheet.
It is usually applied to tests of monetary or quantitative amounts and provides evidence of significant misstatements in stated amounts. Variable sampling is used to test account balances.
Answer: A & B For reviewing the organization's balance sheet for material transactions: Variable sampling or discovery sampling. For conducting an application review of the program that produced the balance sheet: Judgmental sampling.
Judgmental sampling involves selecting samples based on the auditor's judgment and expertise. It's often used when specific items are of interest or when there's a need to focus on high-risk areas, such as material transactions in a balance sheet or reviewing the functionality of a program. This method allows auditors to target specific areas or transactions they deem most important or risky, which aligns well with the objectives of the described reviews.
Example is taken from CISA Review Manual. It is variable sampling.
Definitively A. - this question seems to be directly referencing to the variable sampling description in the Manual: From the CISA Ref Manual 27th ed, 1.7.2 Sampling -> Variable Sampling "...An example of variable sampling is a review of an organization’s balance sheet for material transactions and an application review of the program that produced the balance sheet...."