Factors that Affect Audit Sample Size

Lesson

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Auditors don't have the time and energy to examine everything. They need to test subsets of items, called samples.

How do auditors know how many samples to examine? In general, auditors try to balance the costs of examination with potential benefits of examination.

The greater the odds that a smaller sample size will miss something important, the more important it is to increase the sample size.

Question

Charlie LLC, a recent audit client, is trying to understand the bill for a recent audit.

This is what you've been told:

You noticed that there were very few items available for testing.

What factor affected the number of samples required, and did it necessitate less or more testing?

Answer

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👉 Answer:

It was population size - the smaller the size of the population, the fewer tests are required.

👨‍🎓 This is how we solve it:

As the number of items available for testing (the population) increases, more testing is required. A test of 20 items out of 100 covers 20% of the items. A test of 20 items out of 1,000 only covers 2% of the items. The larger the size of testable population, the more tests are required to get to the same level of coverage.

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