The professional development department of a large CPA firm has prepared the following illustration to familiarize the audit staff with the relationships of sample size to population size and variability and the auditors€™ specifications in regard to the tolerable misstatement and the risk of incorrect acceptance.

For each of the five cases in the above illustration, indicate the relationship of the sample size to be selected from population 1 relative to the sample from population 2. Select your answer from the following numbered responses and state the reasoning behind your choice. The required sample size from population 1 is:
(1) Larger than the required sample size from population 2.
(2) Equal to the required sample size from population 2.
(3) Smaller than the required sample size from population 2.
(4) Indeterminate relative to the required sample size from population2.

Transcribed Image Text:

Auditors Specifications as to a Sample from Population 1 Relative to a Sample from Population 2 Characteristics of Population Planned Risk of Incorrect Acceptance 1 Relative to Population 2 Tolerable Misstatement Size Variability Case 1 Case 2 Case 3 Case 4 Case 5 Larger Equal Larger Smaller Smaller Equal Larger Equal Smaller Equal Equal Larger Smaller Equal Larger Equal Equal Equal Lower Higher