MZUMBE UNIVERSITY

SCHOOL OF BUSINESS

NAME OF STUDENT: SAMWELI ROGERS ANDREW

REGISTRATION NUMBER: 12301137/T.19

COURSE TITTLE: AUDITING AND ASSURANCE

PROGRAM: BAF BS 2B

SUBJECT CODE: ACC 213

INSTRUCTOR: Dr. MTUI

SUBMISSION DATE: 4th, JANUARY 2021

TASK TYPE: INDIVIDUAL ASSIGNMENT

Question;

Bint Msalato firm consider to use MUS in examining Chalii company’s receivable, which were
recorded at Tsh 300,000. Using the audit model, Bint Msalato has identified a necessary risk of
incorrect acceptance of 10 percent and has established a tolerable misstatement of Tsh 25,000
and an expected misstatement of Tsh 10,000.

Requirements;

(a)Determine the necessary sample size for the audit of Chalii’s accounts receivable.
(b)Based on the sample size determined in part (a), what is the appropriate sampling interval?
Choose any random start of your choice

(c) Briefly describe how B Msalato would select the sample from a computerized customer list
that Chalii maintains

(d)Explain the advantages for the sampling method selected by B Msalato, with possible
limitations attached with.

Solution
Data given
Risk of incorrect acceptance (RIA) = 10%
Number of account receivable (Total population)= Tsh 300000
Tolerable misstatement= Tsh 25000
Expected misstatement= Tsh 10000

a) Ratio of expected to tolerable misstatement =

=
=0.4

Tolerable misstatement as a percentage of population =

=
=0.08
Tolerable misstatement as a percentage of population= 8%
Therefore;
Sample size = 72

b) Sampling interval =

=
 = 4166.67(rounded)
Sample sets
1=4166.67
2=8333.34
3=1500.01
4=16666.68
5=20833.35
………..
………..
………..
………..
72= 300000
c) B. Msalato would randomly select a starting point between 0 and 4166.67 and select a
Tsh in the computerized accounts receivable list corresponding to that Tsh. He would
then select every 4166.67thTsh in the inventory list until a total of 72Tsh units were
selected.
d) Sampling methods selected by B. Msalato is monetary unity sampling; the following are
the advantages and the possible limitation attached with.
Advantages
 Result in smaller sample size
 Includes transactions or components reflecting larger dollar amount
 Effective for overstatements errors
 Generally simpler to use than classical variables sampling
Disadvantages (limitation)
 Requires special consideration for accounts with zero or negative balances
 Expanding an MUS sample is difficult if the initial conclusion is to reject account balance
 No effective for understatement or omission errors
 REFERENCES
Alvin A. Arens, Randal J. Elder, Mark Beasley- Auditing and Assurance Services An
integrated approach, 14th Edition-Boston prentice Hall (2012)
Chalfont St. Peter- B3 Auditing principles and practice, 1st edition-IAASB Handbook
(2010)
www.GetThroughGuides.com