Final answer:
The correct statement concerning monetary-unit sampling (MUS) is that overstated units are more likely to be selected due to the method's probability-proportional-to-size nature. To reduce sampling error, increasing the sample size is effective. The ±3 percent sampling error represents the confidence interval range around the observed statistic.
Step-by-step explanation:
The correct statement concerning monetary-unit sampling (MUS) is that overstated units have a higher probability of sample selection than units that are understated. This is because MUS is a probability-proportional-to-size sampling method, which means that larger dollar value items have a higher chance of being selected in the sample. This method is used particularly in auditing to detect material misstatements in a population. It is known for its effectiveness in detecting overstatements due to fraud or error.
To lower the sampling error, one way is to increase the sample size. A larger sample size tends to provide a more accurate estimate of the population parameter, thereby reducing the sampling error. As for the ±3 percent margin of error, it indicates the range within which the true population value is expected to fall with a certain level of confidence. It means that the actual value could be 3 percent higher or lower than the observed statistic in the sample.