ACCA Audit and Assurance (F8) Practice Exam

What determines the sample size in an audit?

1. Variable factors of the population

2. Operational efficiency

3. Reduction of sampling risk to an acceptable level

4. Duration of the audit period

The correct answer is: Reduction of sampling risk to an acceptable level

The determination of sample size in an audit is fundamentally linked to the concept of sampling risk. Auditors need to balance the degree of assurance required with the resources available for the audit. When selecting a sample, auditors aim to reduce sampling risk—that is, the risk that the sample may not accurately represent the entire population being tested. When auditors increase the sample size, they can generally enhance the reliability of their findings, thereby minimizing the possibility of concluding that a population is free from material misstatement when, in fact, it is not. Conversely, if the sample size is too small, the risk of making an incorrect conclusion rises. Therefore, an appropriate sample size is one that effectively balances the need for sufficient evidence with the risk of drawing erroneous conclusions. This focus on controlling sampling risk is crucial for achieving a reliable audit result and ensuring that the auditor meets regulatory and professional standards. Other factors such as operational efficiency, the characteristics of the population, or the duration of the audit period may influence practical considerations of an audit but do not predominantly determine the sample size in the same critical way that ensuring an acceptable level of sampling risk does.