Sampling Risk (1)

Question 1

What is sampling risk?

Answer 1

Risk that the auditor’s conclusion, based on a sample, may be different from the conclusion if the entire population were subjected to the same audit procedure

Question 2

What must auditor determine?

Answer 2

A sample size that will reduce sampling risk to an acceptably low level

Question 3

What if the auditor judges that sampling risk is high?

Answer 3

They will need to select a larger sample to have reasonable assurance that the results are free from material misstatement

Question 4

Where is there a direct relationship?

Answer 4

Between sampling risk and sample size

Question 5

Which factors affect sample size?

Answer 5

Risk of material misstatement
Required confidence level
Expected error
Tolerable error/misstatement

Question 6

Risk of material misstatement effect on sample size? (risks)

Answer 6

If auditor assesses the level of inherent risk and control risk to be high, then detection risk needs to be low to reduce audit risk to an acceptably low level

Question 7

Risk of material misstatement effect on sample size? (non-sampling risk)

Answer 7

Detection risk includes both sampling and non-sampling risk and in order for sampling risk to be low a larger sample size is needed