[barelystayingsane]

I’m confused why letter b. is not correct.

An auditor examining inventory most likely would use variables sampling rather than attributes sampling to:

a. Determine whether discounts for inventory are properly recorded.

b. Discover whether misstatements exist in inventory records.

c. Estimate whether the dollar amount of inventory is reasonable.

d. Identify whether inventory items are properly priced.

Thanks!

[Anonymous]

misstatements in inventory records is a control error. if the vendor invoice say, $10, and instead is recorded as $8, the controls didn't pick up the $2 difference when posting from the source documents to the ledger, whether by machine or human.

this is a controls activities malfunction in the area of as part of the four RIPS, “reviews, information processing, physical controls, segregation of duties”.

therefore this is an attribute sampling rather than a variable sampling.

[Anonymous]

misstatements in inventory records is a control error. if the vendor invoice say, $10, and instead is recorded as $8, the controls didn't pick up the $2 difference when posting from the source documents to the ledger, whether by machine or human.

this is a controls activities malfunction in the area of as part of the four RIPS, “reviews, information processing, physical controls, segregation of duties”.

therefore this is an attribute sampling rather than a variable sampling.

[Never_Give_Up1]

Attribute sampling = testing for an error. You do attribute sampling during test of controls to determine IF there is an error. You do not care what the actual $$$ amount of an error, just if there is one. This is done to help determine how good internal controls are so you know how much detection risk you will have.

Correct answer is I believe C. Variable sampling has to do with the actual $$$ amount being testing. Why do you have you inventory valued at $100 when this item is only worth $25. This type of sampling is when you are testing the total value of a balance to determine if is appears reasonable.

I hope I explained that well enough. If you want more clarification let me know.

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[Never_Give_Up1]

Attribute sampling = testing for an error. You do attribute sampling during test of controls to determine IF there is an error. You do not care what the actual $$$ amount of an error, just if there is one. This is done to help determine how good internal controls are so you know how much detection risk you will have.

Correct answer is I believe C. Variable sampling has to do with the actual $$$ amount being testing. Why do you have you inventory valued at $100 when this item is only worth $25. This type of sampling is when you are testing the total value of a balance to determine if is appears reasonable.

I hope I explained that well enough. If you want more clarification let me know.

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[Anonymous]

@barelystayingsane could you post the correct answer just so I could make sure myself.

I agree with @Never_Give_Up1..

The words that clicked for me in this example was “dollar amount” .. I remember reading in one of my study books …

Variable = dollar amounts , attributes = characteristics / error rate, etc..

[Anonymous]

@barelystayingsane could you post the correct answer just so I could make sure myself.

I agree with @Never_Give_Up1..

The words that clicked for me in this example was “dollar amount” .. I remember reading in one of my study books …

Variable = dollar amounts , attributes = characteristics / error rate, etc..

[barelystayingsane]

C is the correct answer. I was thrown off by the word misstatement in b.

[barelystayingsane]

C is the correct answer. I was thrown off by the word misstatement in b.

[barelystayingsane]

So I thought I understood why b. is incorrect, but I think I'm still confused (I do understand why c. is correct). I know that attributes sampling is used for test of controls, but a deviation in controls does not imply that there is a misstatement. To me, “Do misstatements exist?” and “Is the dollar amount reasonable?” are asking basically the same question. Is b. talking about using PPS to find misstatements? Because I know that PPS uses attributes sampling theory. Thanks!

[barelystayingsane]

So I thought I understood why b. is incorrect, but I think I'm still confused (I do understand why c. is correct). I know that attributes sampling is used for test of controls, but a deviation in controls does not imply that there is a misstatement. To me, “Do misstatements exist?” and “Is the dollar amount reasonable?” are asking basically the same question. Is b. talking about using PPS to find misstatements? Because I know that PPS uses attributes sampling theory. Thanks!

[Never_Give_Up1]

I'm on my phone right now. If I get home and its not answered ill explain.

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[Never_Give_Up1]

I'm on my phone right now. If I get home and its not answered ill explain.

FAR - 81
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Ethics - Done
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[Never_Give_Up1]

Attribute sampling's sole purpose is to determine if the controls that are in place are working as described. In attribute you are not testing for a dollar amount at all. Say XXX company has a policy that each P.O. is signed off on by the department head. You are now testing to see if the XXX company is adhering to their policy by pulling a sample of P.O.'s to see if they were signed off on. If you find that the department head is not signing off on these P.O.'s then your audit risk increases which will result in your detection risk lowering.

Now if you were doing a test of controls sampling and you didn't look at the dollar amount on the items you pulled you would be wasting time. This is called dual testing and you are testing controls and if there are any material misstatements. But for purposed of the exam you need to keep attribute sampling and variable sampling separate

B is referring to attribute sampling. The key word there is “exist.” You have an amount recorded on the books, does the back up documentation “exist?” Yes, then move on to the next item. No, you have an error in internal controls because backup documentation is not being kept. PPS sampling is just a form of variable sampling to help you determine dollar misstatements.

Let me know if you need further clarification.

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[Never_Give_Up1]

Attribute sampling's sole purpose is to determine if the controls that are in place are working as described. In attribute you are not testing for a dollar amount at all. Say XXX company has a policy that each P.O. is signed off on by the department head. You are now testing to see if the XXX company is adhering to their policy by pulling a sample of P.O.'s to see if they were signed off on. If you find that the department head is not signing off on these P.O.'s then your audit risk increases which will result in your detection risk lowering.

Now if you were doing a test of controls sampling and you didn't look at the dollar amount on the items you pulled you would be wasting time. This is called dual testing and you are testing controls and if there are any material misstatements. But for purposed of the exam you need to keep attribute sampling and variable sampling separate

B is referring to attribute sampling. The key word there is “exist.” You have an amount recorded on the books, does the back up documentation “exist?” Yes, then move on to the next item. No, you have an error in internal controls because backup documentation is not being kept. PPS sampling is just a form of variable sampling to help you determine dollar misstatements.

Let me know if you need further clarification.

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[leafs43]

Easy way to remember it:

Variable sampling = numbers

Attribute sampling = not numbers

[Author]

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