When gathering audit evidence the auditor is required to obtain sufficient appropriate evidence to support the audit opinion. For obvious reasons the auditor cannot test every transaction or event that has occurred during the year and generally what happens is that the auditor uses different means for selecting items. The means available to the auditor for selecting items for testing are:
a) selecting all items (100% examination) of a population or a stratum of a population
b) selecting specific items from a population
c) applying audit sampling, which is defined as the application of audit procedures to less than 100% of items within a population such that all sampling units in the population have a chance of selection.
A combination of the above may also be used.
On the audit of Masstores (Pty) Ltd a manufacturer of a very large range of garden products and a subsidiary in the Gardenworld Ltd group, the following procedures will take place:
3.2.1 The company’s finished goods inventory will be tested for completeness; items of inventory will be traced from the warehouse floor to the inventory records.
3.2.2 The minutes of the monthly director’s meeting will be inspected to identify any important decisions taken of which the auditor should be aware.
3.2.3 Tests of controls will be carried out to determine whether all purchase orders are signed by the chief buyer. The company makes thousands of purchases each year.
3.2.4 Lease agreements entered into by the company will be inspected to determine whether those leases which have been categorized as finance leases and capitalized, meet the requirements for the capitalization of the leases. The company entered into twenty nine leases.
3.2.5 The recoverability of amounts owed by debtors which have been outstanding for longer than 90 days will be discussed with the credit manager and the financial manager. The company has over seven hundred debtors of which approximately 10% have amounts outstanding in excess of 90 days. The amount outstanding for longer than 90 days compared to the prior year has increased by nearly sixty percent, whilst sales have remained reasonably constant.
3.2.6 A positive circularization of debtors will take place. The company has twenty two major customers who between them, account for nearly fifty percent of the amount owed by debtors.

REQUIRED:
Indicate which means of selecting items for testing (as listed in a to c above) is most likely to be used for each of the intended procedures listed above (3.2.1 to 3.2.6). Justify your choice. (12 marks)