Practice Quiz

Forensic Accounting

Category - ABFA General Topics

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What happens when the tolerable misstatement is to be kept smaller?
  1. Sample size must be small
  2. Sample size must be large
  3. Tolerable misstatement not related to sample size
  4. None of these
Explanation
Answer: B - Tolerable misstatement can be understood in terms of the amount that an auditor is willing to accept as immaterial. If the level of such ‘tolerance’ is to be kept small, then to reduce any likelihood of a misstatement, the sample size must be large.
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