Assume that your audit team has received the electronic file of sales transactions from ELM and is preparing to use monetary unit sampling in evaluating the fairness of ELM's sales transactions.

Required:

a. How many transactions are included in ELM's sales transaction file? Using the "Field Statistics" function, what is the recorded balance of the population of sales transactions (INVAMT)?

b. By double-clicking on the INVAMT column of the file, sort the population by dollar amount. Based on the composition of this population, which specific item(s) might your audit team wish to consider separately as it designs its MUS application?

c. Determine the sample size and sampling interval for each of the following combinations of parameters. Based on comparisons among these scenarios, describe the impact of each of these parameters on sample size:

d. Using the parameters in Scenario (c)(1) and a random start of $22,053, select a sample from the population of sales transactions. How many transactions were selected (including high value items)?
e. Express your sample in terms of the percentage of the number of transactions and percentage of total dollar value of transactions from the population. Does this appear to give you adequate coverage of the population? (You can use the "Field Statistics" function or export the transactions selected to an Excel file to simplify your calculations.)
For part (f), the IDEA files for items that were selected by the audit team are included as Monetary Sample G.68 and High Values G.68 in Connect. Students may wish to make copies of the data files for this part of the exercise, as IDEA automatically overwrites the file being used with the audited value entered.
f. Assume that the audit team's procedures identified the following misstatements:
Order No. ___________ Recorded Balance ________ Audited Value
17005 ........................ $62,812.33 ................... $60,000.00
17183 ........................ $4,676.54 ..................... $4,529.92
17326 ........................ $14,725.48 .................. $12,000.00
17190 ......................... $151,469.58 ................. $148,992.56
Use IDEA to calculate the upper limit on misstatements. What would your conclusion be with respect to the recorded balance of ELM's sales transactions?

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Confldence (Risk of Incorrect Acceptance) 90% (10%) 90% (10%) 90% (10%) 85% (15%) Tolerable Misstatement Expected Misstatement 1. 2. 3. 4. 350,000 $100,000 450,000 $100,000 350,000 $50,000 350,000 $100,000