Document ID: chunk:federal_register_of_legislation:F2021C01255:body:0:p12
Version: federal_register_of_legislation:F2021C01255
Segment Type: other
Provision Reference: 
Character Range: 31929–35393

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 size of the population has little, if any, effect on sample size.  For small populations however, audit sampling may not be as efficient as alternative means of obtaining sufficient appropriate audit evidence.

Appendix 3

(Ref: Para. A11)

Examples of Factors Influencing Sample Size for Tests of Details

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

FACTOR                                                                                                                                                     EFFECT ON SAMPLE SIZE

    1. An increase in the auditor's assessment of the risk of material misstatement                                                                        Increase               The higher the auditor's assessment of the risk of material misstatement, the larger the sample size needs to be.  The auditor's assessment of the risk of material misstatement is affected by inherent risk and control risk.  For example, if the auditor does not perform tests of controls, the auditor's risk assessment cannot be reduced for the effective operation of internal controls with respect to the particular assertion.  Therefore, in order to reduce audit risk to an acceptably low level, the auditor needs a low detection risk and will rely more on substantive procedures.  The more audit evidence that is obtained from tests of details (that is, the lower the detection risk), the larger the sample size will need to be.

  2.        An increase in the use of other substantive procedures directed at the same assertion                                                          Decrease               The more the auditor is relying on other substantive procedures (tests of details or substantive analytical procedures) to reduce to an acceptable level the detection risk regarding a particular population, the less assurance the auditor will require from sampling and, therefore, the smaller the sample size can be.

  3.        An increase in the auditor's desired level of assurance that tolerable misstatement is not exceeded by actual misstatement in the population   Increase               The greater the level of assurance that the auditor requires that the results of the sample are in fact indicative of the actual amount of misstatement in the population, the larger the sample size needs to be.

  4.        An increase in tolerable misstatement                                                                                                          Decrease               The lower the tolerable misstatement, the larger the sample size needs to be.

  5.        An increase in the amount of misstatement the auditor expects to find in the population                                                        Increase               The greater the amount of misstatement the auditor expects