Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

In defining the sampling unit for an audit, what would an auditor likely choose if discrepancies had been noted in prior confirmations?

1. Small account balances

2. Individual invoices

3. Customers with credit balances

4. Individual overdue balances

The correct answer is: Individual invoices

In the context of an audit, when an auditor has previously noted discrepancies in confirmations, they are likely to opt for individual invoices as the sampling unit. This choice stems from the desire to gather detailed and specific evidence regarding the transactions and balances associated with those invoices. By selecting individual invoices, the auditor can focus on specific transactions that may have previously led to discrepancies. This approach allows for a granular investigation into the details of each invoice, facilitating a more thorough review of how amounts were recorded, whether payments were made, and if the information provided via confirmations aligns with the supporting documentation. It also provides the opportunity to identify patterns or anomalies linked to specific transactions. In contrast, selecting small account balances may not provide sufficient detail or context to understand discrepancies. Choosing customers with credit balances or individual overdue balances could also limit the ability to assess the full scope of issues because these categories may encompass various unrelated transactions not directly tied to prior discrepancies. Therefore, focusing on individual invoices enhances the likelihood of uncovering the root causes of any past issues noted in confirmations.