[HearnUC]

Hi all, I am doing some multiple choice questions for auditing and working on sampling section. Regarding risk of incorrect acceptance, I could NOT find anywhere where it says if the risk of incorrect acceptance increases, you must decrease the sample size. I tried reading where they introduced the topic originally, but couldn’t find it there or in the rest of the section.

It may be because my brain is fried after watching the lecture then attempting the questions, but if anyone could give guidance as to where the explanation is, or if its obvious by definition, please explain.

THANKS!

Must be a CPA in 2012!

AUD - 5/23/12 - 88
FAR - 7/28/12 - 84
BEC - 8/30/12 - 87
REG - 10/20/12 - 75

[jeff]

As luck would have it – I explain it in the free AUD Audio Demo: https://www.another71.com/cpa-exam-audio-course-aud-demo/

Hope it helps

[HearnUC]

Thanks alot. Also, forgot to mention, using Becker 2012 book.

Must be a CPA in 2012!

AUD - 5/23/12 - 88
FAR - 7/28/12 - 84
BEC - 8/30/12 - 87
REG - 10/20/12 - 75

[tmw0918]

I'm guessing you meant to say “the ALLOWABLE risk for incorrect acceptance” right?

[That Cartoon Mouse]

Don't panic, just think it through. The risk of incorrect acceptance is the risk that you'll say everything is fine when it's really not. The arrow of causation really points the other way — when you have a really low sample size, the risk of incorrect acceptance is high. When your sample size is big, the risk you'll say everything is fine when it really isn't is small.

Imagine you have 100,000 accounts receivable. You can't test every single one of them so you do a sample and then say what's true of the sample is probably true of the whole bunch.

So let's say you test 1 of the accounts receivable and it's good — sample size is REALLY small. If you were then going to extrapolate from that one sample, there's a much bigger chance that you got it wrong than if you tested 99,999. If you tested 99,999, the sample size would be really big and the chance that you said everything was fine when it wasn't would be REALLY small.

Of course, the larger sample you take, the greater the risk that you did more work than was necessary, but that's a separate issue.

REG 82 (10/07/11)
BEC 88 (11/01/11)
FAR 86 (11/21/11)
AUD 82 (11/30/11)
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Roger CPA Review, live & cram course

[Anonymous]

The Cartoon Mouse – that explanation actually really helped me. I know it is a simple concept but for some reason it clicked when you explain it like that. Thanks.

[Author]

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