Monetary-Unit Sampling / MUS (Chapter 10)

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Description and Tags

What it’s for: Substantive Testing of Account Balances (testing for dollar overstatements in accounts like AR or inventory). It uses attribute-sampling theory under the hood.

7 Terms

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Sampling Interval

Sampling Interval = Population Book Value ÷ Sample Size

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Tainting factor (for items smaller than the interval)

Tainting Factor = (Book Value − Audit Value) ÷ Book Value OR Tainting Factor = Misstatement ÷ Book Value

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Extrapolated Misstatement

Extrapolated Misstatement = Tainting Factor × Sampling Interval

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Basic Precision

Basic Precision = Sampling Interval × Misstatement Factor for 0 Errors (from table)

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Upper Misstatement Limit (UML)

UML = Extrapolated Misstatement + Allowance for Sampling Risk (adjusted with incremental factors)

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Account is fairly stated if…

UML ≤ Tolerable Misstatement

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Account may be materially misstated…

UML > Tolerable Misstatement