AICPA CPA-Auditing Exam - 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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Domingo

3 months ago

PPS sampling definitely involves risk levels, so C is spot on!

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Daron

3 months ago

D sounds right, but how do they calculate that exactly?

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Lawrence

3 months ago

Wait, isn't B a bit off? Overstated should have a higher chance, right?

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Daniel

4 months ago

Totally agree, C makes sense too!

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Dong

4 months ago

I think A is correct, normal distribution is key.

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Madonna

4 months ago

The sampling interval calculation sounds familiar, but I’m unsure if it’s based on physical units or something else entirely.

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Marsha

4 months ago

I feel like the auditor's control over the risk of incorrect acceptance is a key part of sampling plans, but I’m not confident if that’s the right answer here.

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Elden

4 months ago

I think I practiced a question similar to this where overstated units had a different selection probability, but I can't recall the specifics.

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Casey

5 months ago

I remember something about PPS sampling and how it relates to the normal distribution, but I'm not entirely sure if that means the sampling distribution should always approximate it.

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Launa

5 months ago

Okay, let me see. I know PPS sampling is based on the size of the units, not the number. So I don't think D is correct. I'm leaning towards B, but I'll double-check my understanding.

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Carissa

5 months ago

Hmm, I'm a bit unsure about this. I'll have to think it through carefully. Maybe I should review my notes on PPS sampling before answering.

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Isadora

5 months ago

I'm pretty confident about this one. I think the correct answer is C - the auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan.

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Leah

5 months ago

Ah, this is a tricky one. I remember discussing PPS sampling in class, but I'm having trouble recalling all the details. I'll just take my best guess and move on.

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Jerry

1 year 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

1 year 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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