Question

Which of the following statements is correct concerning statistical sampling in tests of controls?

1) Deviations from controls at a given rate usually result in misstatements at a higher rate.
2) As the population size doubles, the sample size should also double.
3) The qualitative aspects of deviations are not considered by the auditor.
4) There is an inverse relationship between the sample size and the tolerable deviation rate.

Answer 1

The correct statement about statistical sampling in tests of controls is that there is an inverse relationship between the sample size and the tolerable deviation rate. Critical factors in sampling reliability include representativeness, replication, and sufficient sample size to reduce sampling variability.

Step-by-step explanation:

The correct statement concerning statistical sampling in tests of controls is that there is an inverse relationship between the sample size and the tolerable deviation rate. This means that as the tolerable deviation rate or allowance for error increases, the sample size required decreases, and vice versa.

This relationship is fundamental in auditing because it helps determine how large a sample needs to be to confidently assess the effectiveness of internal controls. It's important to note that deviations from controls do not necessarily lead to misstatements at a higher rate (deviations), the sample size does not need to double when the population size doubles, and auditors do consider the qualitative aspects of deviations in evaluating the results of their tests.

It's also pertinent that samples should be representative of the population, and that sampling variability can affect the reliability of the results. Adequate replication and controls, along with sufficiently large sample sizes, contribute to the robustness of statistical tests and the reliability of the conclusions drawn from them. Statistical tests are more accurate with large sample sizes, which reduce the effect of random deviations.