Reference no: EM131625907
Qusetion: Monetary Unit Sampling (MUS) and Classical Variables Sampling.
Required: For each of the following independent situations, indicate the advantages and disadvantages of MUS and classical variables sampling.
a. You are selecting a sample of customer accounts receivable balances for confirmation. The sample is to be selected from a population of customer accounts receivable, the total of which exceeds $4,000,000. This list comprises 4,000 individual customer accounts that are relatively similar in dollar amount with balances ranging from $800 to $8,000. In past years, you have identified a moderate level of misstatement in the client's accounts receivable although the level of misstatement was always less than the tolerable misstatement.
b. You are selecting a sample of accounts payable balances for confirmation with vendors. The population is a list of accounts payable to vendors; at year-end, the total (unaudited) accounts payable balance is $800,000. Amounts owed by the client to 200 separate vendors are included in this balance. Because the client has two major suppliers, a disproportionate amount of this balance ($500,000) is concentrated in these two accounts.
c. You are selecting a sample of customer accounts receivable balances for confirmation. The population is a list of customer accounts receivable; at year-end, the accounts receivable total is $2,500,000. Compared to most of your clients, the number of customer accounts included in this balance is relatively small, and the balances range from $1,000 to $525,000.