Which of the following is an advantage of monetary unit sampling (MUS)? MUS typi

Question

Which of the following is an advantage of monetary unit sampling (MUS)?

MUS typically includes transactions or components reflecting relatively large dollar amounts.

MUS is effective in identifying misstatements in accounts where understatement is a primary concern (such as liabilities).

MUS does not require the auditor to estimate the amount of misstatement in the account balance or class of transactions.

MUS provides a conservative (higher) estimate of misstatement in the account balance or class of transactions.

Explanation / Answer

MONETARY UNIT SAMPLING:

Auditors use monetary unit sampling, also called probability-proportional-to-size or dollar-unit sampling, to determine the accuracy of financial accounts. With monetary unit sampling, each dollar in a transaction is a separate sampling unit. A transaction for $40, for example, contains 40 sampling units. Auditors usually use monetary unit sampling to sample and test accounts receivable, loans receivable, and inventory.

Steps in MUS Application:

PLANNING

1. Determine the test objective.

2. Define the population characteristics:

3. Determine the sample size, using the following inputs

PERFORMANCE

     4. Select sample items

     5. Perform the auditing procedures

EVALUATION

    6. Calculate the projected misstatement and the upper limit on misstatement.

    7. Draw final conclusions.

ADVANTAGES

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