AICPA Exam CPA-Auditing Topic 1 Question 99 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 99
Topic #: 1

Which of the following statements is correct concerning probability proportional to size (PPS) sampling, also known as dollar unit sampling?

AThe sampling distribution should approximate the normal distribution.

BOverstated units have a lower probability of sample selection than units that are understated.

CThe auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan.

DThe sampling interval is calculated by dividing the number of physical units in the population by the sample size.

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. In PPS sampling, the auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan. The inputs for PPS are tolerable error, risk of incorrect acceptance, number of errors allowed, and the recorded amount of the population being sampled.

Choice 'a' is incorrect. The sampling distribution does not have to approximate the normal distribution in order for PPS sampling to be used.

Choice 'b' is incorrect. Overstated units have a higher (not lower) probability of sample selection than units that are understated, because with PPS sampling, each item is given a probability of selection in proportion to its recorded amount (probability-proportional-to-size).

Choice 'd' is incorrect. In PPS sampling, the sampling interval is calculated by dividing the recorded amount of the population (not the number of physical units) by the sample size.

by Heike at Sep 17, 2024, 08:48 AM

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Jerry

2 months ago

I see your point, but I still think B makes more sense because overstated units should have a lower probability of selection to reduce the risk of incorrect acceptance.

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Carrol

2 months ago

I disagree, I believe the correct statement is C) The auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan.

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