Question

25. In Monetary Unit Sampling/Dollar Unit Sampling, which of the following dollar amounts is most likely to be selected?

1. $125.44
2. $100.00
3. $50.00
4. $155.00

26 What of the following best describes the concepts of tracing and vouching?

1. Tracing starts at the source docs and ends at the financial statements, while vouching   starts at the financial statements and ends at the source documents.
2. Vouching starts at the source docs and ends at the financial statements, while tracing starts at the financial statements and ends at the source documents.
3. Both tracing and vouching start at the source docs and end at the financial statements
4. Both tracing and vouching start at the financial statements and end at the source documents.

27. During the audit, the auditor could not obtain evidence with regard to the physical examination of inventory in an overseas warehouse (massive tsunami in southeast Asia where the warehouse is located). The firm determined this to be material but not pervasive. Assuming no other issues during the audit, what type of an opinion should be issued?

1. Disclaimer of Opinion
2. Qualified Opinion (due to audit issues)
3. Qualified Opinion (issue(s) with the financial statements, such as GAAP noncompliance)
4. Adverse Opinion

28. During an audit, the auditor found that the tolerable misstatement was exceeded for multiple balance sheet line items. The firm decided that this issue is both material and pervasive. What type of opinion should be issued?

1. Disclaimer of Opinion
2. Qualified Opinion (due to audit issues)
3. Qualified Opinion (issue(s) with the financial statements)
4. Adverse Opinion

Answer 1

Answer 25: in monetary unit sampling/ Dollar unit sampling, mostly higher amounts are selected and in this case option D will be consider as it is highest and also there is a major difference from last recorded transaction if we go by pattern given in option.

Answer 26: Option A is correct as tracing starts from source document and end at journal/ledger or say financial statements but vouching goes other way around and start from financial statements and end on source document.

Answer 27: When an auditor is sure that he has evidences which are material but not pervasive in nature auditor will give a qualified opinion. In this case qualified opinion is given due to some unavoidable circumstances due to which audit cannot be performed efficiently. In this case option B will be selected.

Answer 28: When an auditor is sure that he has evidences which are both material and pervasive in nature auditor will either disclaimer of opinion or adverse opinion. However disclaimer of opinion given by auditor in case where he is unable to obtain              sufficient and appropriate audit evidence or there is undetected misstatements could be both material and pervasive. In this case auditor already found misstatement in financial statement so he will issue an adverse opinion. Option D will be selected.