E.65 Sample Selection Methods. You are employed by FishWrap,
Ltd., a local newspaper distribution company, and are attempting to determine
the average level of customer satisfaction with the newspaper's delivery
service. All customers are included in a comprehensive database that includes
the following information: customer name, delivery address, telephone number, type
of service (weekly only, weekend only, weekly/weekend), length of service (how
long they have subscribed to the newspaper), and name of carrier.
Because
the local area has 10,500 subscribers, Fish Wrap has decided to sample its customers
instead of surveying the entire population. Based on a number of factors
(including precision and reliability), FishWrap has
determined that a sample of 150 customers is necessary.
Required:
a. In this application, what are some of the major
characteristics of subscribers that should be considered to ensure that a
representative sample is selected?
b. Identify and briefly define four major methods used to select
a sample.
c. How could you select a sample from the population using each
of these methods?
d. The information in each list is arranged in descending order
based on length of service. Indicate how each of the following factors could
impact your ability to use the four methods of selecting a sample from a
population:
1.The database is a typed
list of information.
2.The database is an
electronic list of information and cannot be sorted on any other characteristic.
3.The database is an
electronic list of information and can be sorted on any characteristic.
e. How does each of the following factors impact your ability to
evaluate whether you have selected a representative sample from the population?
1.Delivery address does
not include ZIP code or other reasonable way of identifying physical location
within the subscription area.
2.The length of service
is classified as follows: less than six months, six months to one year, more
than one year.
3.If customers have
relocated within the subscription area, their length of service has been reset
to zero even when they continued their subscriptions.
E.71 Audit Sampling: Types of Audit Samples. You have
been assigned to the audit of Phillip 's, Inc., a
chain of convenience stores. As part of the audit planning, you decide to
perform the following tests:
1. Perform a walkthrough of purchase transactions by selecting
one purchase and following it through all processing steps from the initial
purchase order to recording in the general ledger.
2. Select a sample of purchase vouchers and ensure they are
supported by receiving documents.
3. Select a sample of payroll checks and agree the time to the
time cards and ensure they have supervisor approval. Using the sample, project
the total payroll expense for the year.
4. Select a sample of items from the inventory on hand and
estimate the total inventory on hand at the balance sheet date.
5. Vouch all long-term debt issued during the year to the loan
agreement and the cash received.
6. Select a sample of long-term debt agreements and ensure they
have been approved in the board of directors minutes.
7. Evaluate the control environment by inquiring of personnel as
to the existence of a code of conduct.
Required:
a. Define the terms attributes sampling. variables
sampling. and dual-purpose testing.
b. Indicate whether each of the items (1)-(7) suggests an attributes
sample, a variables sample, a dual-purpose test, or if it is not an example of
sampling.
E.72 Various Sampling Concepts. You overheard the following
comments during a conversation between
Roger Nadal and Rafael Federer about a specific
sampling application.
Required:
Refer to appropriate
professional standards and comment on the validity of each of these
statements.
a. "Using nonstatistical sampling
is so much easier than using statistical sampling. Statistical sampling
requires far too many judgments. Under nonstatistical
sampling, I can just pick items, evaluate them, and make my decision."
b. "I wish nonstatistical
sampling were allowable in generally accepted auditing standards audits. In some
cases, the additional time required by statistical sampling just isn't worth the
benefits."
c. "Once we control the sampling risk, we're home free.
Assuming we select a representative sample, there's nothing else that we need
to worry about."
d. "Be careful if you try to set sampling risk at too low of a
level. You will need to select more items, which will increase the amount of
audit time."
e. "Those transactions with Wimbledon are always so
difficult to audit. Let's exclude them from our sampling frame. We can pick
other items and have a sufficiently large sample to meet generally accepted
auditing standards."
f. "I'm about to perform a walkthrough on Flushing's
processing of sales transactions to understand their nature. What level of
sampling risk should I consider in planning my sample of transactions?"