Document ID: chunk:federal_register_of_legislation:F2021C01255:body:0:p11
Version: federal_register_of_legislation:F2021C01255
Segment Type: other
Provision Reference: 
Character Range: 28884–32277

Appendix 4) and is most efficient when selecting items using random selection.

Appendix 2

(Ref: Para. A11)

Examples of Factors Influencing Sample Size for Tests of Controls

The following are factors that the auditor may consider when determining the sample size for tests of controls.  These factors, which need to be considered together, assume the auditor does not modify the nature or timing of tests of controls or otherwise modify the approach to substantive procedures in response to assessed risks.

FACTOR                                                                                                                                                                      EFFECT ON SAMPLE SIZE

    1. An increase in the extent to which the auditor's risk assessment takes into account plans to test the operating effectiveness of controls                            Increase               The more assurance the auditor intends to obtain from the operating effectiveness of controls, the lower the auditor's assessment of the risk of material misstatement will be, and the larger the sample size will need to be.  When the auditor's assessment of the risk of material misstatement at the assertion level includes an expectation of the operating effectiveness of controls, the auditor is required to perform tests of controls.  Other things being equal, the greater the reliance the auditor places on the operating effectiveness of controls in the risk assessment, the greater is the extent of the auditor's tests of controls (and therefore, the sample size is increased).

  2.       An increase in the tolerable rate of deviation                                                                                                                   Decrease               The lower the tolerable rate of deviation, the larger the sample size needs to be.

  3.       An increase in the expected rate of deviation of the population to be tested                                                                                     Increase               The higher the expected rate of deviation, the larger the sample size needs to be so that the auditor is in a position to make a reasonable estimate of the actual rate of deviation.  Factors relevant to the auditor's consideration of the expected rate of deviation include the auditor's understanding of the business (in particular, risk assessment procedures undertaken to obtain an understanding of internal control), changes in personnel or in internal control, the results of audit procedures applied in prior periods and the results of other audit procedures.  High expected control deviation rates ordinarily warrant little, if any, reduction of the assessed risk of material misstatement.

  4.       An increase in the auditor's desired level of assurance that the tolerable rate of deviation is not exceeded by the actual rate of deviation in the population   Increase               The greater the level of assurance that the auditor desires that the results of the sample are in fact indicative of the actual incidence of deviation in the population, the larger the sample size needs to be.

  5.       An increase in the number of sampling units in the population                                                                                                    Negligible effect      For large populations, the actual