Dollar-unit sampling

Ben Affleck is the auditor for Old Town (OT) Ltd for the year ended 30 June 2022. Ben has decided to use dollar-unit sampling for accounts receivable. The sample size will be 100 invoices and a random start of $30,500 has been chosen. OTs total accounts receivable is $2,666,000. Ben has established a tolerable misstatement amount of $21,221, with a sample interval of $40,100.

Listed below are the amounts for the first 10 invoices from the total population of accounts receivable invoices at OT.

(a) Identify which of the first 10 invoices will be selected by Ben based on his sampling plan.

(b) Explain why invoice INV2010 would always be selected irrespective of the random starting point.

(c) Explain for which account balances it is most useful to use dollar-unit sampling and for which account balances it is less useful.

Invoice number INV2001 INV2002 INV2003 INV2004 INV2005 INV2006 INV2007 INV2008 INV2009 INV2010 Amount NZD 12,000 28,000 11,000 15,000 21,000 22,000 35,000 19,000 26,000 52,000 Invoice number INV2001 INV2002 INV2003 INV2004 INV2005 INV2006 INV2007 INV2008 INV2009 INV2010 Amount NZD 12,000 28,000 11,000 15,000 21,000 22,000 35,000 19,000 26,000 52,000