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. 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?