Which statement best describes ratio estimation in auditing?

Ratio estimation is a statistical technique used in auditing to estimate the value of a population based on a sample. This method relies on the principle that there is a consistent relationship between the values of selected items and the corresponding book values in the financial records. By determining this ratio from the sample and applying it to the entire population, auditors can estimate total figures in a highly efficient manner.

In the context of the statement chosen, it accurately captures this fundamental concept of ratio estimation. The method allows auditors to extrapolate findings from the selected items to estimate the value of all items within the population, leveraging the relationship between those values.

The other statements do not correctly represent the nature of ratio estimation. It is not contingent upon the size of the sample relative to the population, nor does it assess compliance without documentation. Additionally, ratio estimation encompasses the overall population's values rather than concentrating solely on individual transactions. Understanding the principles underpinning ratio estimation is crucial for applying this technique effectively in an audit context.