Which of the following expresses the relationship between changes in the factors and changes in sample size in variables sampling?
A) Tolerable misstatement, direct; expected error, inverse; risk of incorrect rejection, direct.
B) Tolerable misstatement, inverse; expected error, direct; risk of incorrect rejection, inverse.
C) Tolerable misstatement, inverse; expected error, inverse; risk of incorrect rejection, inverse.
D) Tolerable misstatement, inverse; expected error, inverse; risk of incorrect rejection, direct.

Question

Quizplus · Accepted Answer

The relationship between changes in the factors and changes in sample size in variables sampling is such that as the tolerable misstatement decreases (inverse relationship), the sample size increases (direct relationship) because a smaller tolerable misstatement means the auditor must test more to ensure the desired level of assurance. Similarly, as the expected error increases (direct relationship), the sample size increases (direct relationship) because more testing is necessary to detect errors. Finally, as the risk of incorrect rejection decreases (inverse relationship), the sample size increases (inverse relationship) because a lower risk of incorrect rejection means that the auditor can be more confident in accepting the results of the sample without the need for additional testing. Therefore, B is the best choice as it correctly expresses these relationships.

Which of the Following Expresses the Relationship Between Changes in the Factors