Sampling Method
MUS is standard for substantive overstatement testing. Classical is used when items are similar in size or when testing for understatement.
↳ ISA 530.A4 — items are selected proportional to their monetary value. Larger items have a higher probability of selection. Standard for overstatement testing.
Confidence Level
Reflects the assessed risk of material misstatement. Higher confidence = larger sample.
↳ Risk of incorrect acceptance: 10%. Confidence factor (CF): 2.31.
Population & Materiality
Enter the total monetary value of the population being sampled and the materiality thresholds from your planning.
Total monetary value of the account or class of transactions
Typically performance materiality or a fraction of it
Prior year misstatements or current estimate. Leave blank or enter 0 if none.
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Sampling Considerations for Manufacturing
Manufacturing audits revolve around high-volume inventory transactions, complex cost allocation systems, and work-in-progress valuation. Sampling design must account for the heterogeneity of inventory items — raw materials, work-in-progress, and finished goods each have different valuation methods and misstatement risk profiles.
Sampling focus: Manufacturing
Inventory is typically the dominant population for substantive sampling in manufacturing. MUS is effective for testing inventory valuation where a small number of high-value items coexist with many low-value items. For physical inventory counts, attribute sampling is commonly used to test the accuracy of perpetual records against physical quantities.
Key sampling considerations
Stratify inventory populations by category (raw materials, WIP, finished goods) because each has different valuation complexity and misstatement patterns. Standard costing systems require separate testing of variance accounts — sample sizes should cover both the cost accumulation and variance analysis cycles. Slow-moving and obsolete inventory items often require a separate targeted sample because obsolescence provisions are a key judgment area. For cycle counts rather than full physical counts, ensure your sampling covers items across multiple count dates to detect systematic timing errors. Production overhead allocation rates should be tested using a separate sample of cost pools and allocation bases to verify the rate calculation.
ISA 530.5 — Audit sampling means applying audit procedures to less than 100% of items within a population so that all sampling units have a chance of selection.
ISA 530.A4 — MUS uses monetary units as the sampling unit, giving each monetary unit an equal probability of selection.
ISA 530.A11 — Sample size is affected by the tolerable misstatement, expected misstatement, and the required level of confidence.