Certified Internal Auditor (CIA) Practice Test

In cases where high-value items make up a large portion of an account balance, what is a likely outcome of using stratified sampling?

1. It simplifies evaluation of sample results

2. It reduces sample size

3. It creates larger estimates of variability

4. It decreases nonsampling error

The correct answer is: It decreases nonsampling error

Stratified sampling involves dividing a population into distinct subgroups or strata that share similar characteristics before sampling. By focusing on high-value items separately, this method allows auditors to ensure that important or significant transactions are adequately represented in the sample. One likely outcome of implementing stratified sampling in this context is the decrease in nonsampling error. Nonsampling errors can arise from biases in the selection of items or from inaccurate data. By creating strata based on the value of items, the sampling process becomes more targeted. This approach minimizes the risk of overlooking high-value items, which are critical in the audit process, leading to more accurate results and reducing the likelihood of errors associated with misrepresentation or omissions in data analysis. This targeted sampling approach also helps to ensure that the characteristics of the subgroups are well understood and adequately represented, supporting stronger conclusions and enhancing overall audit quality. As a result, the effectiveness and reliability of the internal audit process can significantly improve through the precise nature of stratified sampling.