Auditing & Assurance Services 6th Edition by Timothy Louwers

Exercise 109

Monetary Unit Sampling. Georgie Costanza, CPA, is auditing the accounts receivable of Vandalay Industries and is considering the use of MUS techniques. Costanza has a number of questions regarding the use of MUS and has asked you to provide answers to them.
Required:
a. Under generally accepted auditing standards, can Costanza use nonstatistical sampling in the examination of Vandalay accounts receivable?
b. What are the advantages to using statistical sampling in the audit?
c. What are the risks associated with sampling and to what type of losses do they expose Costanza?
d. How does Costanza establish the appropriate level of the risk of incorrect acceptance?
e. Is Costanza permitted to specify that certain items be examined, or do all items need to be randomly selected?
f. How can Costanza increase the likelihood that the items in the sample are representative of the population?
g. Other than the dollar amount of the misstatements, are any other factors important for Costanza to consider with respect to the misstatements?