Darren is an audit manager working on the attestation engagement for Summer Enterprises, LLC$,$ a

large and diversified client. Darren has reviewed the audit file pertaining to accounts receivable

from the current year and noted various overstatements at the end of the year which the client had

attempted to correct at the beginning of the following period. As Darren plans this year's audit of

accounts receivable, what approach might he decide to take?

Darren may decide to adopt a reliance strategy, whereby Darren delegates responsibility

for this part of the audit to the internal audit function and relies on their findings.

Darren may opt to audit the entire population. This will help ensure that no

misstatements are present in accounts receivable, and that any overstatements can be

immediately corrected.

Darren may decide to adopt a reciprocal population technique for the sampled accounts,

to attempt to locate any overstatements corrected in the following period.

None of the choices is correct.

Mike and Annie are discussing audit sampling at lunch one day. Annie mentions that she heard the term

'stratification' mentioned in an audit meeting this morning and wasn't sure what it meant or how it

would relate to audit sampling. How should Mike best answer these questions?

Stratification is used in audit sampling to subdivide an audit population. This strategy helps

auditors focus on areas that may be higher risk.

Stratification is required to be used for the audits of publicly traded companies per generally

accepted auditing standards and requires the auditor to subdivide the sample into logical

populations.

Stratification pertains to separating an audit population into different groups or strata and

comparing them against each other to search for anomalies.

None of the choices is correct.