L12 Notes_Part_4 - • The anticipated misstatements (AM)....

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Monetary-Unit Sampling (MUS) Disadvantages of MUS 1. The selection of zero or negative balances generally requires special design consideration. 2. Understatements violate the model’s assumptions. 3. The general approach to MUS assumes that the audited amount of the sample item is not in error by more than 100%. 4. When more than one or two misstatements are detected, the sample results calculations may overstate the allowance for sampling risk.
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Steps in MUS Sampling Application Planning 1. Determine the test objectives. 2. Define the population characteristics. • Define the population. • Define the sample unit. • Define a misstatement. 3. Determine the sample size, using the following inputs: • The desired confidence level or risk of incorrect acceptance (ARIA). • The tolerable misstatements (TM).
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Unformatted text preview: • The anticipated misstatements (AM). • Population size. Performance - Pull the Sample 4. Select sample items. 5. Perform the auditing procedures. Evaluation 6. Understand and analyze any misstatements observed. 7. Calculate the projected misstatement (PM) and the upper error limit (UML). 8. Draw final conclusions. Sample Size = BV * R * ETF/(TM – (AM*EF)) = (2,500,000 * RF * 1)/(125,000 – (27,722*EF) Book value 2,500,000 $ Tolerable misstatement (TM) 125,000 $ Sample size 93 Desired confidence level = (1-ARIA) 95% Anticipated Misstatement (AM) 27,722 $ Sampling interval 26,882 $ Example Information Steps in MUS Sampling Application 3. Determine the sample size, using the following inputs: • The desired confidence level = (1- ARIA). • TM • AM • Population size....
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This note was uploaded on 10/05/2011 for the course ACG 5637 taught by Professor Monikacaushoulli during the Fall '08 term at University of Florida.

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L12 Notes_Part_4 - • The anticipated misstatements (AM)....

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