Question

which of the following would not cause the audit team to select a larger sample of items under a pps sampling application? multiple choice a reduction in the risk of incorrect acceptance from 10 percent to 5 percent an increase in the tolerable misstatement from $30,000 to $60,000 an increase in the expected misstatement from $20,000 to $40,000 all of the choices would result in selecting a larger sample

Answer 1

The correct answer is "an increase in the expected misstatement from $20,000 to $40,000."

Step-by-step explanation:

In Probability-Proportional-to-Size (PPS) sampling, the sample size is influenced by the acceptable level of risk of incorrect acceptance (alpha risk), tolerable misstatement, and expected misstatement. The formula for determining the sample size under PPS is:

`\[ Sample\ Size = \left( (Book\ Value\ of\ Population * Tolerable\ Misstatement)/(Sampling\ Interval) \right) \]`

where Sampling Interval =
`\((Tolerable\ Misstatement)/(Risk\ of\ Incorrect\ Acceptance)\).`

Let's consider the provided scenarios:

1. Reduction is Risk of Incorrect Acceptance:A lower risk of accepting incorrect values would lead to a smaller sample size, as the formula is inversely proportional to the risk of incorrect acceptance.

2. Increase in Tolerable Misstatement: An increase in tolerable misstatement would result in a larger sample size since the formula is directly proportional to the tolerable misstatement.

3. Increase in Expected Misstatement: This would lead to a larger sample size, as the formula is directly proportional to the expected misstatement.

Therefore, the correct answer is the scenario where the expected misstatement increases from $20,000 to $40,000. This increase directly contributes to a larger sample size, making it the option that would not cause the audit team to select a larger sample.