Detailed Answer
(a) The requirement is to identify the correct statement
concerning the auditor’s use of statistical sampling. Answer (a) is
correct because an estimate of the variation of the population, the
standard deviation, is needed to use classical variables sampling
(AICPA Audit and Accounting Guide, Audit Sampling).
Answer (b) is incorrect because PPS sampling does not make an
assumption that the underlying population is normally
distributed. Answers (c) and (d) are incorrect because classical
variables sample selected accounts and therefore need not
include special considerations to those with a negative balance.