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Dan and Lily, two audit staff associates are discussing audit sampling while working on the audit of a major client. Dan is explaining to Lily
Dan and Lily, two audit staff associates are discussing audit sampling while working on the audit of a major client. Dan is explaining to Lily the various audit sampling methods that he has seen being used by audit managers. Dan asks Lily if she has ever heard of the ratio method with respect to evaluating sample results. Lily replies that she has not, so they decide to ask their supervisor, Brad. Which of the following responses from Brad would be MOST appropriate to answer this question? The ratio method is typically used by the external auditors when evaluating sample results and is used to estimate the projected audit value of the population. The auditor obtains the ratio by examining the ratio of the audited value and dividing it by the book value for each strata used as part of the sample. The ratio method is used by auditors in conjunction with the internal audit function. The method compares the level of misstatements found by the external auditors to that found by the internal auditors and a ratio is
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