Factors Influencing the Selection of Sampling Methodology

D.

Sampling is a commonly used audit technique to select a subset of data or transactions for testing, with the objective of drawing conclusions about the entire population. The selection of a sampling methodology is influenced by various factors, including the nature of the audit objective, the reliability of the underlying data, the level of risk associated with the audit, and the level of assurance desired.

Out of the given options, the type of risk that would MOST influence the selection of a sampling methodology is detection risk. Detection risk is the risk that the auditor will not detect a material misstatement in the financial statements. It is one of the three components of audit risk, along with inherent risk and control risk.

The level of detection risk is inversely related to the level of assurance desired. Therefore, the higher the level of detection risk, the lower the level of assurance that can be obtained from the audit. Conversely, the lower the level of detection risk, the higher the level of assurance that can be obtained.

The selection of a sampling methodology is influenced by the level of detection risk because the auditor needs to determine the sample size and the selection method to achieve the desired level of assurance. For example, if the auditor wants to achieve a low level of detection risk, he or she may need to select a larger sample size and use a more rigorous selection method, such as systematic or stratified sampling. On the other hand, if the auditor is willing to accept a higher level of detection risk, he or she may be able to select a smaller sample size and use a simpler selection method, such as random sampling.

In summary, detection risk is the type of risk that would MOST influence the selection of a sampling methodology, as it determines the level of assurance desired and the sample size and selection method needed to achieve that level of assurance.