Please explain this question.
A CPA’s test of the accuracy of inventory counts involves two storehouses. Storehouse A contains 10,000 inventory items and Storehouse B contains 5,000 items. The CPA plans to use sampling without replacement to test for an estimated 5% deviation rate. If the CPA’s sampling plan calls for a specified reliability of 95% and a tolerable rate of 7.5% for both storehouses, the ratio of the size of the CPA’s sample from Storehouse A to the size of the sample from Storehouse B should be
A. More than 1:1 but less than 2:1.
B. 2:1.
C. 1:1.
D. More than .5:1 but less than 1:1.
Answer (A) is correct.
The relationship between population size and sample size is direct. As the population size increases, so does the necessary sample size, although not proportionally. Generally, the population size has very little effect on the sample size when the population is large. According to the AICPA Audit Guide Audit Sampling, a population greater than 2,000 sampling units is large. If the population has between 200 and 2,000 sampling units, the effect on the sample size is small. For smaller populations, sample size is reduced by the effect of population size. Thus, more items would have to be sampled from Storehouse A than from Storehouse B, but not twice as many.
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