Question

In: Finance

Identify the advantages and disadvantages of monetary-unit sampling.

Identify the advantages and disadvantages of monetary-unit sampling.

Solutions

Expert Solution

Monetary unit sampling is a process of sampling that is used to know the account balances or monetary amounts which are in the large quantity contain any error so it helps in rectifying the errors like misstatements of the amounts in population.

The advantages and disadvantages are mentioned below ..

Advantages

  • It is very easy in application than the variables classical sampling.

  • There is no requirement of considering the attributes of the wide quantities of amounts and when started knowing sample size like standard deviation of dollar amounts within those selected quantities.

  • The classification of a population is not required so the samples are automatically picked in the share of quantity to their dollar amounts.

  • And, if no error is expected, the sampling and the same sizes are quite efficient.

Disadvantages

  • It automatically assumed that the amounts audited in a sampling unit is less than the recorded amount.

  • This sampling is not subject to the selection of the small recorded amounts.

  • If there is any shortfall found in the sampling like misstatements that may results to the incorrect projections.

  • The Negative signs of amounts are necessary to be deal in a separate manner.

  • There are more chances of rejection by the auditor of recorded amount for a large quantities.


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