The audit team is planning to examine a sample of control policies and procedures.Assume that,based on the intended degree of reliance on internal control,the audit team wishes to control the risk of overreliance to 5% and establishes a tolerable deviation rate of 8%.Based on past audits,the audit team would normally estimate the expected population deviation rate at 2%; however,because of improvements in the client's internal control,they now feel that a rate of 1.25% is appropriate.Which of the following is not true with respect to the impact of the reduction in the expected population deviation rate on sample size?
A)The reduction in the expected population deviation rate would result in a smaller sample size.
B)The audit team would likely need to have a reasonable justification for establishing a lower expected population deviation rate.
C)The resultant sample size assuming the reduction in the expected population deviation rate would be 77 items.
D)The reduction in the expected population deviation rate would result in the audit team examining 19 fewer items.

Question

Quizplus · Accepted Answer

The reduction in the expected population deviation rate would result in a larger sample size, not a smaller sample size as stated in option A. This is because a lower expected population deviation rate decreases the degree of sampling risk, thereby increasing the level of assurance required from the sample.

Option B is true because a justification for the lower expected population deviation rate would be needed to ensure that the sample is properly designed and meets auditing standards.

Option D is also untrue because a reduction in the expected population deviation rate would result in the audit team examining more items, not fewer items.

Therefore, only option C is not true.

The Audit Team Is Planning to Examine a Sample of Control