CPA Exam — AUDPerforming Further Procedures and Obtaining EvidenceHard
An auditor is planning to use monetary unit sampling (MUS) to test the valuation assertion for accounts receivable. The auditor has determined a tolerable misstatement of $5,000 and expects no misstatements. Which of the following factors would lead the auditor to select a LARGER sample size for MUS?
- AAn increase in the population size.
- BAn increase in the auditor's desired confidence level.
- CA decrease in the expected misstatement.
- DAn increase in the tolerable misstatement.
Show answer & explanationAnswer & explanation
Correct answer: B. An increase in the auditor's desired confidence level.
In MUS, as with other sampling methods, an increase in the desired confidence level (or a decrease in the acceptable risk of incorrect acceptance) requires a larger sample size to provide more assurance that the sample findings are representative of the population.
Why the other options are wrong
- A. While population size is a factor, in MUS, the sample size is not directly proportional to population size. It's more affected by confidence level, tolerable misstatement, and expected misstatement. For very large populations, the change in sample size due to population size becomes negligible once a certain size is reached.
- C. A decrease in expected misstatement generally leads to a *smaller* sample size, as less error is anticipated.
- D. An increase in tolerable misstatement allows for more error, thus decreasing the required sample size.
Monetary Unit Sampling (MUS)
A statistical sampling method used primarily for substantive testing of account balances. It selects individual dollars as the sampling unit and is efficient for detecting overstatements, especially when few misstatements are expected.
- Sampling unit is the individual dollar.
- Larger dollar amounts have a higher probability of selection.
- Sample size is influenced by tolerable misstatement, expected misstatement, and desired confidence level.
- More efficient for detecting overstatements.
Memory trick: To get a BIGGER MUS sample, you want more CONFIDENCE.