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SA 530 audit sampling

When tolerable rate of deviation/mistatements increases then the sample size decreases and vice versa How is this possible ? Can u explain with some examples

Answers (5)

An increase in tolerable misstatement or the level of materiality decreases the sample size necessary to collect sufficient appropriate audit evidence. Because you are ready to accept more deviation from the tolerable misstatement, the samples to be checked can be reduced.For example, if the tolerable misstatement in an account balance of Rs.1crore is Rs.50,000 and the total projected misstatement based on an appropriate sample () is Rs.10,000, he may be reasonably assured that there is an acceptably low sampling risk that the true monetary misstatement for the population exceeds tolerable misstatement and thus reduces sample size.

So say for account tolerable rate is 5% so in in applying audit procedures we found out that deviation or misstatements 9% , we have to increase our sample size and if we found that the misstatements or deviations is 3% , we have to decrease or continue with the same sample size