Edwards has decided to use probability-proportional-to-size (PPS) sampling sometimes called dollar-unit sampling, in the audit of a client's accounts receivable balance. Few, if any errors of overstatement are expected.
Edwards plans to use the following PPS sampling table:
5% Reliability Factors For Overstatements
Number of Risk of incorrect Acceptance
Overstatements 1% 5% 10% 15% 20%
0 4.61 3.00 2.31 1.90 1.61
1 6.64 4.75 3.89 3.38 3.00
2 8.41 6.30 5.33 4.72 4.28
3 10.05 7.76 6.69 6.02 5.52
4 11.61 9.61 8.00 7.27 6.73
Required
a.) Identify the advantages of using PPS sampling over classical variables sampling.
Note : Requirements b) and c) are not related.
b.) Calculate the sampling interval and the sample size Ewards should use.