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Lodestar, sample selection question

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Lodestar, sample selection question

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by Kim Smith.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 19, 2023 at 1:53 pm #690259
    Gahngeun
    Participant
    • Topics: 27
    • Replies: 21
    • ☆

    Hello

    The textbook says the following statement is TRUE:

    “The sample slection does not address the risk of understatement as it has focused on the ten largest balances.”

    So does that mean other methods of sampling would address the risk of understatement better?

    Thank you!

    August 19, 2023 at 5:41 pm #690281
    Kim Smith
    Keymaster
    • Topics: 135
    • Replies: 8309
    • ☆☆☆☆☆

    Any sample selection method that “focuses” on largest account balances is inevitably biased towards overstatement.

    If testing for understatement (e.g. accounts payable), a sample should be selected from a “reciprocal population” of transactions (e.g. purchases).

    August 21, 2023 at 5:31 pm #690392
    Gahngeun
    Participant
    • Topics: 27
    • Replies: 21
    • ☆

    It makes sense now. Thank you so much!

    August 21, 2023 at 5:56 pm #690396
    Kim Smith
    Keymaster
    • Topics: 135
    • Replies: 8309
    • ☆☆☆☆☆

    You are welcome!

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Lodestar, sample selection question’ is closed to new replies.

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