Mus Sampling

ACCOUNTING 441

WINTER 2002

PPS OR MUS SAMPLING

1. DEFINE THE SAMPLING UNIT.

-THE SAMPLING UNIT IS EACH DOLLAR IN THE POPULATION

HOWEVER,

-THE AUDITOR DOES NOT TEST INDIVIDUAL DOLLARS, BUT THE ACCOUNT OR TRANSACTION CONTAINING THE DOLLAR SELECTED

-THE ACCOUNT OR TRANSACTION SELECTED IS CALLED THE LOGICAL UNIT

2. SELECT THE SAMPLE

-EACH DOLLAR IN THE POPULATION HAS AN EQUAL CHANCE OF BEING SELECTED.

-THE POPULATION IS DIVIDED INTO EQUAL GROUPS OF DOLLARS.

-EACH GROUP OF DOLLARS IS CALLED A SAMPLING INTERVAL.

-THE SAMPLING INTERVAL IS DETERMINED BY DIVIDING THE BOOK VALUE OF THE POPULATION BY THE SAMPLE SIZE (SEE SAMPLE SIZE SELECTION BELOW)

-EXAMPLE:

• TOTAL ACCOUNTS RECEIVABLE OF $2,500,000 AND AUDITOR DECIDES TO SAMPLE 100 ITEMS (SEE BELOW FOR DETERMINING SAMPLE SIZE). MUST GET THE ACCOUNTS IN ORDER AND GO FROM TOP OF LIST DOWN

• THE SAMPLE INTERVAL WILL BE $2,500,000 DIVIDED BY 100 (SAMPLE SIZE) OR $25,000

• USE RANDOM NUMBER BETWEEN 1 AND 25,000 AS THE STARTING POINT.

• FOR OUR EXAMPLE ASSUME THE STARTING POINT IS $3,000

• FIRST ITEM IS THE ACCOUNT THAT CONTAINS DOLLAR NUMBER 3,000; SECOND ITEM CONTAINS DOLLAR NUMBER 28,000; THE THIRD DOLLAR 53,000; ETC.

• NOTE THAT AN ACCOUNT WITH AN AMOUNT OF $25,000 WILL ALWAYS BE SELECTED. AN ACCOUNT WITH A BALANCE OF $50,000 OR MORE WILL BE SELECTED TWICE OR MORE (BUT WILL ONLY BE TESTED (E.G. CONFIRMED) ONCE

• LOGICAL UNITS (SEE DEFINITION ABOVE) CONTAINING MORE DOLLARS HAVE A GREATER CHANCE OF SELECTION. ALSO, EACH DOLLAR HAS AN EQUAL CHANCE OF BEING SELECTED (E.G. EVERY 25,000TH ITEM. IT ALL DEPENDS ON THE RANDOM STARTING POINT.)

3. DETERMINING THE SAMPLE SIZE

-COULD USE SAMPLE SIZE FORMULA PAGE 71OF INTERNAL AUDIT SAMPLING TOO DIFFICULT FOR TEACHER, SO GO TO NEXT ALTERNATIVE.

-NEXT ALTERNATIVE-- DETERMINE...