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Data Analytics Case Edwards has decided to use monetary unit sampling (MUS) in the audit of a clients accounts receivable balance. Few, if any, misstatements
Data Analytics Case
Edwards has decided to use monetary unit sampling (MUS) in the audit of a clients accounts receivable balance. Few, if any, misstatements of the account balance are expected.
Required:
- Identify the advantages of using MUS over classical variables sampling.
- Calculate the sampling interval and the sample size Edwards should use given the following information:
| Tolerable misstatement | $ 50,000 |
| Risk of incorrect acceptance | 5% |
| Estimated misstatement | $ 15,000 |
| Recorded amount of accounts receivable | $3,000,000 |
What is the effect on sample size of changing the risk of incorrect acceptance to 1%?
- Using the 5% Risk of incorrect acceptance, calculate the total projected misstatement if the following three errors were discovered in MUS:
| Misstatement | Book Value | Audited Value |
| 1 | $ 400 | $ 320 |
| 2 | 500 | 0 |
| 3 | 15,000 | 12,500 |
- Calculate basic precision and incremental allowance.
- Calculate the upper limit on misstatements.
- Will you accept or reject the account as materially correct?
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