AICPA Exam CPA-Auditing Topic 1 Question 99 Discussion

Choice 'c' is correct. In PPS sampling, the auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan. The inputs for PPS are tolerable error, risk of incorrect acceptance, number of errors allowed, and the recorded amount of the population being sampled.

Choice 'a' is incorrect. The sampling distribution does not have to approximate the normal distribution in order for PPS sampling to be used.

Choice 'b' is incorrect. Overstated units have a higher (not lower) probability of sample selection than units that are understated, because with PPS sampling, each item is given a probability of selection in proportion to its recorded amount (probability-proportional-to-size).

Choice 'd' is incorrect. In PPS sampling, the sampling interval is calculated by dividing the recorded amount of the population (not the number of physical units) by the sample size.