Which of the following courses of action would an auditor most likely follow in planning a sample of cash disbursements if the auditor is aware of several unusually large cash disbursements?
A) Set the tolerable deviation rate at a lower level than originally planned.
B) Identify the large and unusual disbursements as individually significant and test 100 percent.
C) Increase the sample size to reduce the effect of the unusually large disbursements.
D) Continue to draw new samples until all the unusually large disbursements appear in the sample.

Question

Quizplus · Accepted Answer

If the auditor is aware of several unusually large cash disbursements, it would be more prudent to identify and test each of these disbursements separately as they may individually have a significant impact on the financial statements. This would help the auditor to understand the nature and purpose of each of these disbursements and verify that they are properly recorded and authorized. Testing 100% of these disbursements would be the most effective way to achieve this objective. Setting the tolerable deviation rate lower or increasing the sample size may not address the specific risk posed by the large and unusual disbursements. Continuing to draw new samples until all the unusually large disbursements appear in the sample may be wasteful and time-consuming.

Which of the Following Courses of Action Would an Auditor