When selecting a sample size for substantive tests of balances a factor, other factors being equal, that would result in a larger sample is a decrease in the tolerable misstatement.
The correct answer is an option (A)
In this question we have been given we need to a factor when selecting a sample size for substantive tests of balances that would result in a larger sample.
We know that there is an inverse relationship between sample size and tolerable misstatement.
So the sample size would increase if the tolerable misstatement decreases.
A sample size will increase when expected misstatement increase or population variability is higher.
Therefore, an auditor is calcualting a sample size related to substantive test of balances, which facctor with other factors being equal - a decrease in the tolerable misstatement
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The complete question is:
When selecting a sample size for substantive tests of balances which factor, other factors being equal, would result in a larger sample?
A) a decrease in the tolerable misstatement
B) small expected misstatements
C) an increase in the tolerable misstatement
D) an increase in the acceptable risk of incorrect acceptance
