When planning a sample for a substantive test of balances, an auditor should consider tolerable misstatement for the sample.This consideration should:
A) not be changed during the audit.
B) be related to preliminary judgments about materiality levels.
C) not be adjusted for qualitative factors.
D) be related to the auditor's business risk assessment.

Question

Quizplus · Accepted Answer

The auditor should consider tolerable misstatement for the sample which should be related to preliminary judgments about materiality levels. This is because a material error in the account can significantly affect the decision-making of users of financial statements. Thus, a sample size for substantive tests should be designed to give reasonable assurance that material errors are detected. Tolerable misstatement is the maximum amount of error that the auditor can accept in the financial statements without qualifying their opinion. Therefore, the auditor should relate tolerable misstatement for the sample to the preliminary materiality levels.

When Planning a Sample for a Substantive Test of Balances