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An auditor selects a sample using the total value of trade receivables as the population. The sample is selected as follows:
one dollar is selected at random and deemed as the first dollar;
individual dollars are then selected at consecutive fixed intervals of $10,000.Which of the following statements, in respect of this form of sample selection, is the most accurate?
A.The basis of sample selection is more suited to the detection of understatement errors than overstatement errors
B.The basis of selection would be ineffective where errors occur in the population on a systematic basis
C.The basis of selection may be preferred when the book population under examination has a highly skewed value distribution
D.The basis of selection ensures that all errors in excess of $10,000 will be detected
The answer is C
Can you pls explain me why option B is wrongWelcome to my AA forum!
Systematic errors are consistent errors that occur repeatedly in the same manner and direction, often due to flaws in the underlying accounting system or procedures. Systematic errors create bias.
For example, in a billing system, a “bug” in the software causes invoices to be generated with an 11% sales tax applied, even though the invoices themselves show the correct rate of 10%. This would result in consistently overcharing customers.
That would not invalidate MUS as an appropriate sample selection method (which is what option B is saying).
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