Week 6-2

Question 1

Binomial distribution

Answer 1

Sampling form infinite population or without replacement

Question 2

Poisson distribution

Answer 2

Continuous population where error probability (p) is very small

Question 3

MUS/DUS (monetary unit sampling)

Answer 3

• To determine whether an account balance is materially misstated
• Random selection of monetary units from a population and results in a sample comprising the physical items (e.g.
  invoices) within which the selected monetary units reside
• MUS is recognized as the preferred substantive sampling method for auditors in most circumstances

Question 4

Advantages MUS

Answer 4

o Emphasizes larger balances
o Several samples tested in one item
o Easy to apply

Question 5

Disadvantages

Answer 5

o Negative and zero balances are not selected

Question 6

Modified sieve sampling – Hoogduin, Hall, Tsay - overview

Answer 6

Issue?
- If you have a sampling technique (proportion relative to its size) PPS not adapted to augmentation
- Augment selection maintaining PPS properties: 2-stage selection: over-represent small and under-represent larger
When?
- Projected audit difference bigger than initially expected
- Change in materiality
- Extended population size
How?
- Modified sieve technique
- Permits selection of additional line items while maintaining PPS properties
- The items of the initial sample are included in the new sample (sieve ratio)