Question

explain the relationship between sampling evidence, materiality and desired level? Accounting auditing.

An example is the Higher risk of material misstatement the more evidence we need The lower the materiality amount the higher the sample size

Answer 1

DEFINITION -

1 SAMPLE SIZE - Items selected out of the the total population available, as a representative of the entire population , is termed as sample size.

2 MATERIALITY - The %ge set by the auditor, at an appropriate low level, so as to minimize the audit risk.

3 Desired level - The level of accuracy that the auditor desires to achieve, by the conduct of audit.

RELATIONSHIP BETWEEN SAMPLE SIZE, MATERIALITY AND DESIRED LEVEL :-

SAMPLE SIZE AND MATERIALITY -

Their is an inverse relationship between the sample size and materiality. More the sample size, less the level of materiality.

SAMPLE SIZE AND DESIRED LEVEL-

Their is direct relationship between the sample size and desired level. More the accuracy aimed (desired level) more should be the sample size.

MATERIALITY AND DESIRED LEVEL-

Their is inverse relationship between the materiality and desired level. More the accuracy aimed (desired level) lower should be the %ge of materiality set by the audit

THEREFORE, MORE THE SAMPLE SIZE, LOWER THE LEVEL OF MATERIALITY AND HIGHER THE DESIRED LEVEL AND VICE-A-VERSA.