Which statement about sample size is true in an audit?

• A. The higher the expected occurrence rate, other factors remaining unchanged, the larger will be the sample size.
• B. An increase in the tolerable occurrence rate, other factors remaining unchanged, increases the sample size.
• C. The lower the acceptable risk of underassessment of control risk, the smaller will be the sample size be.
• D. The more critical the attribute being tested, the higher will be the tolerable occurrence rate set by the auditor, and the larger will the sample size.

Answer: (A)

In audits using attribute sampling, the number of observations you need is driven by how many deviations you expect to find. If you anticipate a higher rate of deviations, you must sample more to achieve the same level of precision and confidence in your conclusion. That’s why the statement about expecting a higher occurrence rate leading to a larger sample size is the correct one.

Increasing the tolerable deviation rate, on the other hand, means you’re willing to accept more deviations, so you can get away with a smaller sample to reach the same confidence. A lower acceptable risk of underassessment typically requires more data, not less, so it would push the sample size up rather than down. And when an attribute is more critical, you would generally set a stricter (lower) tolerable rate and often increase the sample size to maintain greater assurance—so stating a higher tolerable rate in that case is not accurate.