Final answer:
The auditor must consider the tolerable deviation rate, desired confidence level, and expected population deviation rate to determine the sample size for a test of controls. These factors are critical in selecting an appropriate sample size to acquire sufficient evidence for the audit.
Step-by-step explanation:
To determine the sample size for a test of controls, an auditor should consider the tolerable deviation rate, the desired confidence level, and the expected population deviation rate. The expected population deviation rate is the rate at which deviations from prescribed control procedures are anticipated to occur in a population. The choice of an expected population deviation rate affects the sample size needed to achieve a certain level of assurance in the audit results.
When auditors evaluate the effectiveness of a company's internal controls, they use sampling to infer the control's effectiveness over the entire population. A lower expected deviation rate and a higher desired confidence level both lead to a larger sample size, as does a lower tolerable deviation rate. It is crucial for auditors to accurately estimate these components to ensure they select an appropriate sample size for their audit tests. The sample size is essential in achieving sufficient evidence to support the audit opinion.