How would decreases in tolerable misstatement and assessed level of control risk affect the sample size in a substantive test of details?
A) A decrease in tolerable misstatement would decrease sample size, while a decrease in assessed level of control risk would increase sample size.
B) Decreases in both tolerable misstatement and assessed level of control risk would decrease sample size.
C) Decreases in both tolerable misstatement and assessed level of control risk would increase sample size.
D) A decrease in tolerable misstatement would increase sample size, while a decrease in assessed level of control risk would decrease sample size.

Question

Quizplus · Accepted Answer

Decreasing the tolerable misstatement will increase the required sample size because the auditor will need to increase the level of assurance. Decreasing the assessed level of control risk will decrease the required sample size because the auditor is relying less on the controls and more on the substantive testing. Therefore, decreasing tolerable misstatement will have an opposite effect on sample size compared to decreasing assessed level of control risk.

How Would Decreases in Tolerable Misstatement and Assessed Level of Control