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.