Monetary Unit Sampling with IDEA: Determining Sample Size and Selecting Sample Items. Assume that your audit team has established the following parameters for the examination of ELM’s sales transactions: Risk of incorrect acceptance 10% Tolerable misstatement $389,638 (or 10% of the recorded balance of the transactions Expected misstatement $58,446 (or 1.5% of the recorded balance of the transactions) Required:a. Use IDEA to determine the necessary sample size, given the above parameters.b. What is the sampling interval? Show how the sampling interval can be arithmeticallydetermined from the sample size and the population size.c. Assuming a random start of 5,678, use IDEA to extract sample items from the population. List the transactions associated with the sample items selected by your audit teamfor examination. (Be sure to use “fixed interval extraction” and “high values in database”as options.)d. Describe how IDEA extracts sample items from the population of sales transactions.e. Based on the items selected from the population, does it appear that monetary unit sampling selects larger dollar items for examination? Provide the basis for your answer.f. Why does the number of transactions extracted in part (c) differ from the sample size? Isthis a concern?
Monetary Unit Sampling with IDEA: Determining
| Risk of incorrect acceptance | 10% |
| Tolerable misstatement | $389,638 (or 10% of the recorded balance of the transactions |
| Expected misstatement | $58,446 (or 1.5% of the recorded balance of the transactions) |
Required:
a. Use IDEA to determine the necessary sample size, given the above parameters.
b. What is the sampling interval? Show how the sampling interval can be arithmetically
determined from the sample size and the population size.
c. Assuming a random start of 5,678, use IDEA to extract sample items from the population. List the transactions associated with the sample items selected by your audit team
for examination. (Be sure to use “fixed interval extraction” and “high values in database”
as options.)
d. Describe how IDEA extracts sample items from the population of sales transactions.
e. Based on the items selected from the population, does it appear that monetary unit sampling selects larger dollar items for examination? Provide the basis for your answer.
f. Why does the number of transactions extracted in part (c) differ from the sample size? Is
this a concern?
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