ISA/MASA 500 states that the objective of the auditor is to design and perform audit

procedures in such a way as to enable the auditor to obtain sufficient appropriate audit

evidence to be able to draw reasonable conclusions on which to base the auditors opinion.

Required:

(i)

Briefly explain what constitutes audit evidence, citing two examples of audit evidence,

one from an internal source and one from an external source.

(4 marks)

(ii) The reliability of audit evidence varies depending on its nature. List FOUR (4)

comparisons where one form of audit evidence is considered to be more reliable than

another with your justification in each instance.

(b) ISA/MASA 700 deals with the auditors responsibility to form an opinion on the financial

statements and ISA/MASA 705 (Revised) deals with the auditors responsibility to issue an

appropriate report in circumstances when the auditor concludes that a modification to the

auditors opinion on the financial statements is necessary.

Required:

For each of the following modified opinions, state the circumstances under which it is issued

in an auditors report:

(i) Qualified opinion

(ii) Adverse opinion

(iii) Disclaimer of opinion

(7 marks)

(c) Review the following audit scenarios and recommend, with justifications, the appropriate

audit opinion to be issued in EACH scenario. You answer should state the type of audit

opinion to be issued and the justifications (reasons) for giving such an opinion.

(i) X Sdn Bhd

A contractor is unable to include the income, expenses and costs related to a long-term

project in Yemen which is in a state of war. The project is estimated to contribute 25%

of the companys current annual revenue.

All accounting records have been destroyed during a bombing incident and no

alternative sources of audit evidence can be obtained.

(3 marks)

(ii) Y Sdn Bhd

The directors refused to include one disclosure in notes to the financial statements on

the ground that the financial statements are clear and self-explanatory. However, this

will give impact to the overall of financial statement.

(3 marks)