Question 2: Calculating an audit sample
An auditor is planning the process to confirm accounts payable. The total of debit balances in the trial balance of payables is $2.8 million. The total of credit balances in trial balance of payables is $3.2 million. The auditor decides that the tolerable misstatement for this sampling application is 10% of $700 000, the desirable level of assurance is 95% and one error is expected. There are 5000 supplier balances.
Required:
a) Given the information disclosed, calculate what the estimated sample size should be for this auditor.
b) Explain why sampling is considered an important concept in auditing.
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