The auditor makes the decision about whether the misstatements found in a substantive test of balances sample are material after
A)determining if the misstatements are within the tolerance level
B)determining if the misstatements are within the assurance level
C)extrapolating misstatements from the sample to the population
D)projecting misstatements from the sample to the population

Question

Quizplus · Accepted Answer

The auditor determines the materiality of misstatements found in a substantive test of balances sample by extrapolating the misstatements from the sample to the population. This is done using statistical sampling techniques to estimate the total amount of misstatements in the population based on the results of the sample. The auditor will then use professional judgment to determine whether the misstatements are material in the context of the financial statements as a whole. Tolerance level and assurance level are relevant concepts in sampling, but they do not directly determine the materiality of misstatements in the sample. Projecting misstatements is not a relevant concept in statistical sampling.

The Auditor Makes the Decision About Whether the Misstatements Found