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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence

Auditor Marlow is testing a population of 5,000 sales invoices using statistical sampling. The audit senior wants to reduce the sample size but keep the same tolerable misstatement and expected misstatement. Which change would be consistent with ISA 530 and would allow a smaller sample?

Accepting a higher sampling risk, meaning a lower confidence level, permits a smaller sample, provided the auditor considers the impact on audit risk. Lower tolerable misstatement or higher expected misstatement would enlarge the sample, and excluding high-risk items would bias the sample rather than legitimately reduce it.

  1. AReducing the tolerable misstatement
  2. BAccepting a higher sampling risk by lowering the required confidence level, having considered the effect on audit riskCorrect
  3. CIncreasing the expected misstatement in the population
  4. DStratifying so that the highest-risk items are excluded from testing

Explanation

Accepting a higher sampling risk (lower confidence level) reduces sample size, though the auditor must consider the effect on overall audit risk. Lower tolerable misstatement and higher expected misstatement both increase the sample size. Excluding high-risk items from testing would make the sample unrepresentative and is not a valid way to reduce size.

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