Your audit firm is testing accounts receivable and has stratified the population into 5 strata, as outlined in the table below. Probability theory has been used to determine the appropriate sample size for a given level of confidence within each stratum. Different methods of sample selection were used for each stratum.

Required

a. Define stratification and the benefits that may arise from using this technique.

b. For each stratum, define the sample selection method used and whether it would be an appropriate sample selection method for statistical sampling.

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Dollar value No. of No. of accounts of accounts in population Confidence required (%) ($) accounts sampled Sample selection method >1 200 000 10 100 10 100 001 to 1 53 95 10 000 000 10 001 to 100 110 90 10 000 1000 to 10 175 80 000 <1000 245 50 10 10 10 10 Used computer-generated random numbers to select. Randomly selected the second account, then every eleventh account. Chose two accounts from every page of a five-page print-out. Selected the ten accounts from Tasmania that were all less than $1000.