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. Use the MUS Excel template (THE NEXT FILE IN THIS MODULE) to complete following requirements. Required: a. Identify the advantages of using MUS over classical variables sampling. b. 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%? c. 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 d. Calculate basic precision and incremental allowance. e. Calculate the upper limit on misstatements. f. Will you accept or reject the account as materially correct?
AutoSave OFF @va ... 2. monetary unit sampling excel template Home Insert Draw Page Layout Formulas Data Review View Tell me e Share Comments V A 5 FC LC Y Conditional Formatting Format as Table 1 Cell Styles Insert v 1 Delete v Format Y Paste B I U ar Av $ Sort & Filter Sensitivity Find & Select Analyze Data P28 X fx D E F G H P R S T 1 Eition of Results Practed Misstatement Note: In evaluating the results start with misstatements in accounts that are less in size than the sampling Internal and have the highest tainting percentage Then, add misstatement in accounts that are equal to or larger than the sampling interval Upper Limit on Misstatements Misstatomont Book Value 1 2 3 Tainting Audited Value Misstatement Percentago NA NA NA NA NA NA NA Sampling Projecte Interval Misstatement 0 0 0 0 0 0 0 5 6 7 A 1 Press Controle to che input 2 3 4 5 6 7 Monetary Unit Sampling Worksheet 9 Sample San Damian 10 INPUTS 11 Population Dollar Value 12 Tolerable Misstatement (dolar Amount) 13 Expected Population Misstatement 14 Acceptable Risk of Incorrect Acceptance 3.00 15 Expansion factor 1.60 16 17 Required Sample Size 0.00 18 Sampling interval 0 0 19 20 21 22 23 24 25 26 Expansion Factors 27 1% 1.90 28 5% 1.60 29 10% 1.50 30 15% 1.40 31 20% 1.30 32 25% 125 33 30% 1.20 34 37% 35 50% 1.00 36 37 Basic Precision $0 Incremental Allowance Rollabilly Factor 3.00 Rollability Factor Projected Incremental Misce Alowence Increme (increment. 1) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 D 0 0 0 0 0 0 0 0 0 0 0 115 0.00 0 Upper Umiton Misstatement $0 39 40 41 42 43 What is your conclusion based on Sheet1 + + Ready El + 80% AutoSave OFF BO... 2. monetary unit sampling excel template Home Insert Draw Page Layout Formulas Data Review View Tell me e Share Comments V L 3. Insert v 1 Delete v A 5 FC LL Conditional Formatting Format as Table Cell Styles y Y Paste B I U I WA $ (209 Sort & Filter V Find & Select Sensitivity Format v Analyze Data P28 Ax fx 4 B D E F G H 1 1 K L N P 0 R S T U 0 307 27% 120 1.15 1.00 003 GO: 000 no 000 GOD 0 C Upper Lindon Mastetement so What is your candus on used on the samples: Select Conde 73 10 15 36 27 36 10 40 41 12 13 16 45 46 47 48 Reinity Factors 19 50 51 52 53 50 55 56 57 SR Risk Toros Acceptance Number of OverTM 19 10%. 15% 20 24 20% 57% 50% 461 1.00 2.11 1.90 1.51 1.39 1.31 1.00 D.ID SOX 375 30% 25 20% 15% 10% 5% IN ILMU 1.00 121 1 39 16 1.90 231 3.00 261 1.41 2.14 2.14 3.79 100 1. JE 3.23 4.75 68 2.61 3.25 3.62 393 4.21 4.22 333 6.30 14 10.67 11.23 12.42 1202 434 4.77 511 52 4 5.43 5.50 628 63 5.61 6A) 20: 743 79: 350 256 812 836 9. 971 10.54 1185 1457 7.67 &bs 9.21 9A in 34 10. 1118 13.15 16 0 . E. 1.56 1021 021 11.16 13.00 13.00 14.44 171 10.14 11.39 11.92 13.53 11.25 6.60 775 10 m 8.00 9.16 1161 1442 154: 1697 2015 15.73 105 131 50 BD 61 62 3 bb 67 ER 19 3D 21 72 73 22 25 26 77 76 29 BD 31 82 13 Sheet1 + Ready El + 70%
