Question

What are the advantages and disadvantages of monetary unit sampling?

Answer 1

Solution:

Advantages of Monetary unit sampling:

1. Simple to use than classical variable sampling.

2. This sampling method is effective for overstatement errors.

3. This method results in smaller sample size

4. This sampling method includes transactions or components reflecting larger dollar amounts. Therefore one need to focus on transaction with higher value only.

Disadvantages of monetary unit sampling:

1. This method is not effective for understatement or omission errors.

2. This method provides a conservative (higher) estimate of misstatement.

3. Expanding sample is difficult if the initial conclusion is to reject the account balance.