Q.An auditor examining a large trading company decides to test check only a small sample of the company's routine sales invoices, but checks EVERY entry relating to the sale of the company's own factory building during the year in full. As a student of auditing, explain why the auditor adopted two different approaches for these two categories of transactions. (This is supplementary practice content — the real Semester III paper for this unit is 100% MCQ; Case Problems here build the deeper apply-the-rule reasoning the MCQ format cannot test.)

Routine sales invoices are numerous and similar, making sampling appropriate; a factory-building sale is a one-off, high-value transaction that must be checked in full.

The auditor's two different approaches are both correct, and both follow directly from the standard distinction between what test checking is well-suited for and what it is not.

Why routine sales invoices are appropriately test-checked. A large trading company generates a high volume of similar, routine, individually low-value sales invoices throughout the year. These are exactly the kind of numerous, repetitive, low-risk transactions test checking is designed for (Section b) — checking every single invoice would be extremely time-consuming and costly, while a genuinely representative sample, spread across the audit period, can still give the auditor reasonable assurance about the accuracy of sales as a whole. Provided the sample is well-chosen (covering different months, different customers, and rotated from the prior year's sample), this is a sound, efficient audit approach. …