Question

In which of the following circumstances would it be appropriate to apply a statistical sampling approach using MUS?

When testing monetary values and the population of data is not available in electronic format.
When testing a population for which you are unable to determine the financial impact of an error.
When testing whether items in a population have or don't have certain characteristics.
When testing sales transactions downloaded from the entity's general ledger system.

Answer 1

Monetary Unit Sampling (MUS) is most suitable for testing large monetary values in electronic formats, such as sales transactions from a general ledger system, as it allows auditors to quantify the financial impact of errors on the financial statements.

Step-by-step explanation:

It would be appropriate to apply a statistical sampling approach using Monetary Unit Sampling (MUS) in circumstances where the testing involves large monetary values and the data is available in an electronic format. This allows an auditor to focus on larger value transactions which have a higher risk of causing material misstatements, using a methodology that scales the sampling probability with the item's monetary size. MUS is particularly effective when the financial impact of an error can be quantitatively assessed, which meets the objective of providing a basis for assessing the monetary amounts in the financial statements. Therefore, among the options listed, MUS would be most appropriate when testing sales transactions downloaded from the entity's general ledger system.

While MUS could technically be applied to data that is not in an electronic format, this is increasingly uncommon in modern auditing practices due to the efficiency losses compared to electronic data analysis. When dealing with populations for which a financial impact of an error cannot be determined or when assessing qualities that do not have a monetary attribute, alternative sampling methods would likely be more suitable as MUS is designed for monetary populations.

Answer 2

MUS is suitable for testing monetary overstatement errors in a dataset and is most appropriate when testing electronic records of sales transactions from a general ledger system, as it implies monetary emphasis and digital data availability.

Step-by-step explanation:

Monetary Unit Sampling (MUS) is a statistical sampling technique commonly used in auditing. MUS is appropriate when the primary objective of the audit test is to detect overstatement errors in monetary values within a dataset. Given the circumstances mentioned, MUS would be most appropriate 'when testing sales transactions downloaded from the entity's general ledger system'.

This scenario implies that the data is in an electronic format conducive to applying MUS, and the monetary aspect of sales transactions is directly relevant to the audit test's intention. On the other hand, MUS is less suitable when population data is not available in electronic format, when the financial impact of an error cannot be determined, or when testing for characteristics that are not quantifiably monetary.