An auditor plans to use a monetary unit sampling (MUS) approach for testing the valuation assertion of accounts receivable. If the auditor expects a low rate of misstatement, which of the following is generally true regarding MUS?
- AMUS requires a larger sample size than classical variables sampling.
- BMUS is more efficient for overstatements than understatements.
- CMUS is appropriate when the population contains many zero balances.
- DMUS selects individual items based on their physical size.
Show answer & explanationAnswer & explanation
Correct answer: B. MUS is more efficient for overstatements than understatements.
Monetary Unit Sampling (MUS), also known as Probability Proportional to Size (PPS) sampling, is generally more efficient for detecting overstatements, especially when the auditor expects a low rate of misstatement. This is because larger monetary items have a higher probability of being selected, and overstatements are often associated with larger balances. It is less efficient for understatements or populations with many zero balances.
Why the other options are wrong
- A. MUS can often result in a smaller sample size than classical variables sampling, especially when misstatements are expected to be low.
- C. MUS is generally inefficient when a population contains many zero or negative balances because these items have no chance of selection or require special handling.
- D. MUS selects items based on their monetary value, not physical size.
Monetary Unit Sampling (MUS)
A statistical sampling method that uses attribute sampling theory to express a conclusion in monetary amounts. It is also known as Probability Proportional to Size (PPS) sampling.
- Each dollar in the population has an equal chance of being selected.
- Larger items are more likely to be selected.
- Most effective for populations with low expected misstatement and when looking for overstatements.
Memory trick: MUS: Overstated, Dollar-Weighted, Low Misstatement.