Detailed Answer
(c) The requirement is to identify the correct statement
regarding probability-proportional-to-size (PPS) sampling.
Answer (c) is correct because when using PPS sampling, the
auditor controls the risk of incorrect acceptance by specifying a
risk level when planning the sample. Answer (a) is incorrect
because PPS sampling does not assume a normal distribution.
Answer (b) is incorrect because the book value of the unit
determines how probable it is that it will be included in the
sample, not whether it is over or understated. Answer (d) is
incorrect because the sampling interval is calculated by dividing
the book value of the population by the sample size.