Monetary unit sampling (MUS) is a statistical sampling method that is used to determine if the account balances or monetary amounts in a population contain any misstatements. Each individual dollar in the population is considered a sampling unit, so that account balances or amounts in the population with a higher value have a proportionally higher chance of being selected. Once the testing of a sample has been completed, a conclusion is reached in dollar amounts, rather than the rate of occurrence of misstatements. MUS methods are relatively simple to use, and so can be an efficient tool for audit testing. MUS advantages include the following:
It is easier to apply than classical variables sampling.
There is no need to consider the characteristics of the population when determining sample sizes, such as the standard deviation of dollar amounts within the population.
The stratification of a population is not needed, since samples are automatically selected in proportion to their dollar amounts.
If no misstatement is expected, the sample size is quite efficient.
MUS methods are especially applicable when making selections for accounts receivable confirmations, loan receivable confirmations, inventory price tests, and fixed asset addition tests. Despite these advantages, MUS is not perfect. It is subject to the following problems:
It assumes that the audited amount of a sampling unit is not greater than the recorded amount.
It tends to be conservative in stating the confidence level achieved.
It will probably not select small recorded amounts.
Large understatements found in a sample can lead to invalid projections.
Negative balances need to be dealt with separately.
The auditor is more likely to reject an acceptable recorded amount for a population.
Given these concerns, MUS methods are less applicable when making selections for receivable confirmations where there are many unapplied credits and inventory test counts where there may be a number of under- and over-statements.
An MUS can be used for tests of controls, where it provides information about the proportion of dollars being processed by the controls under review.