Flinders Boats Ltd builds a variety of watercraft for a wide range of commercial and private clients.

You are engaged in the audit of trade receivables and the audit manager has suggested that monetary unit sampling is an effective way of selecting a sample for carrying out an accounts receivable circularisation.

You have been provided with a trade receivables report from Flinders; this report shows both the balance outstanding from the client as well as the total revenue earned from that client for the year.

Required

a. Discuss the advantages and disadvantages of using monetary unit sampling to select the debtors to circularise.

b. Assuming a materiality level of $300 000, select a sample for testing using monetary unit sampling.

c. Critically discuss the sample selected in part (a) and discuss an alternative method.

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Customer No. Customer Name Revenue 1 2 3 4 5 Arthur Rock 6 7 Dennis Tours 316 789 Balance 24 536 Mrs Blenkintop Ginger Ltd Fort Grant Pty Ltd 145 364 7572 6 373 821 440 987 983 542 89 762 86 627 42 765 Coracle Holidays Ltd Spanish Suitcase 6 458 769 286 482 59 319 4 563 00 Mr Jimb 789 746 96 234 9 Class Botham Tours Ltd 3 362 514 (6 453) 10 Needy Seagoon 85 592 6.584 11 Lakeside Excursions Ltd 896 373 324 364 12 Claustra Sub Tours 423 784 33 456 13 Scull and Row Ltd 4 951 648 408 550 14 Trireme Ram Co Ltd 1 750 255 134 635 15 Sandra Blount 603 902 46 454 16 Lord and Lady Damp 307 112 74 851 17 Uphill Sailing Ltd 3 998 636 546 738 18 Keel and Crow Ltd 5 789 352 414 602 19 Mountain Kayak Pty Ltd 73 775 5 675 37 456 920 2 982 357