The auditors have audited a sample with a standard deviation of audited values larger than they had originally estimated. In this situation, to maintain the risk of incorrect acceptance at its predetermined level without increasing the size of the sample, which of the following statements is correct?
A) The adjusted allowance for sampling risk will be smaller than had been planned.
B) The adjusted allowance for sampling risk will be larger than had been planned.
C) The risk of incorrect rejection will necessarily decrease.
D) The size of the population must be decreased.

Question

Quizplus · Accepted Answer

When the standard deviation of the sample is larger than expected, the variation within the population is greater than anticipated. This indicates that the risk of incorrect acceptance may be higher than expected. To maintain the risk of incorrect acceptance at its predetermined level without increasing the sample size, the auditor can adjust the allowance for sampling risk. The adjusted allowance for sampling risk needs to be smaller than had been planned to account for the larger standard deviation in the sample. Therefore, choice A is the correct answer. Choice B is incorrect because the allowance for sampling risk needs to be smaller, not larger. Choice C is incorrect because the risk of incorrect rejection is not necessarily affected by the larger standard deviation in the sample. Choice D is also incorrect because changing the size of the population does not affect the risk of incorrect acceptance.

The Auditors Have Audited a Sample with a Standard Deviation