Which of the following statements best describes an inherent limitation of the monetary-unit sampling method?
A)It can only be used for substantive testing of asset accounts.
B)It requires the use of a computer system to perform the required calculations.
C)Misstatement rates must be large and the misstatements must be overstatements.
D)Misstatement rates must be small and the misstatements must be overstatements.

Question

Quizplus · Accepted Answer

Monetary-unit sampling inherently assumes that misstatements are overstatements, which is suitable for tests where understatements are not a concern or are unlikely. It is particularly effective when misstatement rates are expected to be small, as it focuses on the value of transactions, making it more likely to select larger items for testing.

Which of the Following Statements Best Describes an Inherent Limitation