An audit senior has made the following changes to the accounts receivable and ac
ID: 2549873 • Letter: A
Question
An audit senior has made the following changes to the accounts receivable and accounts payable statistical sampling plans submitted by a staff accountant. How will each of these changes affect the sample size?
Reduce both the tolerable misstatement and the expected misstatement.
Decrease the assessed risk of material misstatement.
Increase the population variability.
Change from blank confirmation forms to confirmations that state the balance.
Increase the tolerable misstatement.
Decrease both the expected misstatement and the assessed risk of material misstatement.
Increase the population to include another category of payables.
Decrease the population variability.
Indeterminate
Decrease
Increase
No effect
-A.B.C.D.Reduce both the tolerable misstatement and the expected misstatement.
-A.B.C.D.Decrease the assessed risk of material misstatement.
-A.B.C.D.Increase the population variability.
-A.B.C.D.Change from blank confirmation forms to confirmations that state the balance.
-A.B.C.D.Increase the tolerable misstatement.
-A.B.C.D.Decrease both the expected misstatement and the assessed risk of material misstatement.
-A.B.C.D.Increase the population to include another category of payables.
-A.B.C.D.Decrease the population variability.
A.Indeterminate
B.Decrease
C.Increase
D.No effect
Explanation / Answer
1. Reducing the tolerable misstatements will increase the sample size as now more samples will be collected which have low level of tolerable error. C
2. If there is a decrease in the assessed risk of material misstatement it results in an increase in the sample sizes. C
3. Increase in population variability has no effect on sample size as they are not dependent on each other. Both are independently selected by the auditor. D
4. Blank confirmations are received from customers of clients only when they fill the confirmation and send to the auditor but in case of confirmations that state balance, customer says whether he agrees with it or not. IN the given case sample size may increase as more customers will say yes or no with balance confirmations however actual increase in indeterminate.
5. Increase the tolerable misstatement will lead to decrease in sample size. B.
6. Decrease of assessed risk of material mistatement will increase the sample size whereas decrease in expected mistatement will decrease the sample, therefore it is indeterminate the actual fall or rise. A.
7. Increase in population will increase the sample size.
8. No effect on sample size.
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