M/s KLM & Co. Chartered Accountants, a partnership firm, while designing tests of controls and tests of details in MN Ltd. has to determine the…

The auditor may decide to select specific items from a population. In making this decision, factors that may be relevant include: the auditor's understanding of the entity, the assessed risks of material misstatement, and the characteristics of the population being tested. Specific items selected may include: High value or key items: The auditor may decide to select specific items within a population because they are of high value, or exhibit some other characteristic. All items over a certain amount: The auditor may decide to examine items whose recorded values exceed a certain amount so as to verify a large proportion of the total amount of a class of transactions or account balance. Items to obtain information: The auditor may examine items to obtain information about matters such as the nature of the entity or the nature of transactions.