Final answer:
The auditor should perform additional audit procedures when misstatements exceed materiality. To increase confidence in survey sampling, the sample size should be increased, whereas a smaller sample size decreases the level of confidence.
Step-by-step explanation:
When likely misstatements are greater than overall materiality, the auditor should c) Perform additional audit procedures. They should not increase nor decrease the level of materiality as these levels have been predetermined based on the importance and nature of the information. Ceasing the audit process is not an appropriate action. Instead, the auditor is required to perform additional procedures to determine the cause and extent of the misstatements and assess whether they are material to the financial statements as a whole.
In survey sampling terms, to increase the level of confidence while keeping the error bound the same, a firm would need to increase the sample size. However, if the firm conducts another survey and wants to keep the error bound the same but only surveys 49 people, the level of confidence would decrease. This is because a smaller sample size reduces the reliability of the survey results and thus the confidence level.