AUD Study Group – Q1 2018 - Page 11

I have two questions which are kind of same but the answers are kind of overlapping.

Q1. When unaudited financial statements of a nonpublic entity, which were neither reviewed nor compiled, are presented in comparative form with audited financial statements in the subsequent year, the unaudited financial statements should be clearly marked to indicate their status and
I. The report on the unaudited financial statements should be reissued.

II. The report on the audited financial statements should include a separate paragraph stating the auditor assumes no responsibility for the prior period financial statements.

Ans: II only

Q2 When unaudited financial statements are presented in comparative form with audited financial statements in a document filed with the Securities and Exchange Commission, such statements should be

ANS:Marked as “unaudited”.

I answered :Marked as “unaudited” and referred to in the auditor's report (isn't this means adding other-matter-paragraph from question 1 answer)

@Teal- Good luck!! Hopefully, you will be done forever after tomorrow with this crazy exam.

@SONA…for 1st question, i think the answer is Both Choices I & II and as for 2nd question, the difference arises because it mentions SEC thus issuers only. for issuers, you would mention in the explanatory paragraph that the auditor didn't audit, review, or compile the prior period financial statements and that auditor assumes no responsibility for them.

non-issuers…report in other-matter paragraph whereas issuers…report in the explanatory paragraph

I am done!!! Everyone – I agree, the SIMS are awful and I also ran out of time….we will see!!

MORE FROM AICPA

Risk Assessment Procedures and Related Activities
.05 The auditor should perform risk assessment procedures to provide a
basis for the identification and assessment of risks of material misstatement
at the financial statement and relevant assertion levels. Risk assessment procedures
by themselves, however, do not provide sufficient appropriate audit evidence
on which to base the audit opinion. (Ref: par. .A1–.A5)

.06 The risk assessment procedures should include the following:
a. Inquiries of management, appropriate individuals within the internal
audit function (if such function exists), others within the
entity who, in the auditor's professional judgment, may have information
that is likely to assist in identifying risks of material
misstatement due to fraud or error (Ref: par. .A6–.A13)
b. Analytical procedures (Ref: par. .A14–.A17)
c. Observation and inspection (Ref: par. .A18)

I hope you are done today and no more CPA exam:)

What would you suggest? on the basis of today's experience.

@Sona..oh man, this question took way longer to answer than i thought. but i am glad i saw it as it help cleared some of my confusions around the topic as well. there is a subtle difference between the NINJA question and the definition of risk assessment procedures so have to be very careful when reading audit questions.

question is asking for to obtain an understanding of entity's internal controls what would the auditor not do? so basically, we need to know what he will do to? to understand controls they need to be tested and there are 4 procedures for testing controls..remember RIIO (reperformance, inspection, inquiry, or observation) therefore, you will not do analytical procedures.

Any tips for distinguishing between Existence/occurence and Completeness assertions? I always get those questions wrong. (e.g. which procedure would be most likely to corroborate mgmt's existence assertion related to inventory, things like that)

yes @itooshallpass – I always think of a “V” for Vouching as a down arrow to the source docs (goes from F/S to source docs and tests for Existence/Occurrence). Then a “T” is for an up arrow to the F/S (goes from source docs to F/S and tests for Completeness). Also, if you think about it, for completeness, you always want to go to the F/S because if you were to go FROM the F/S, you would never include anything not listed in the F/S, so for completeness, you need to see what you are missing, not what you already have. Hope that helps!!