Describe Two Advantages and Two Disadvantages of Monetary-Unit Sampling (MUS)

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Examlex · Accepted Answer

The Answer is Should include two advantages and disadvantages from the following:
Advantages:
1. When the auditor expects no misstatements, MUS sample size can be computed and usually results in a smaller sample size than classical variables sampling.
2. The calculation of the sample size and the evaluation of the sample results are not based on the variation between items in the population.
3. When applied using a probability-proportional-to-size sample selection procedure, MUS automatically results in a stratified sample because sampled items are selected in proportion to their dollar amounts. In effect, larger dollar items have a higher probability of being selected.
Disadvantages:
1. The selection of zero or negative balances generally requires special design consideration.
2. If the auditor detects items that are in error by more than 100 percent, special adjustments will be necessary when calculating sample results.
3. When more than one or two misstatements are detected using a MUS approach, the sample results calculations may overstate the allowance for sampling risk.

Describe Two Advantages and Two Disadvantages of Monetary-Unit Sampling (MUS)

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