[Anonymous]

I’m half-way through the Becker lecture for AUD-4 and there is so much information. What should I focus on the most? What is the best way to study this chapter? I feel that this is the most important chapter for AUD, but there is a lot of memorization. Once, I finish this chapter, I’m going to hit the MC non-stop, but I’m afraid of any SIMS that may come up regarding this topic. I have to make sure I understand the topic.

[Texas27]

A4 was the worst… To tell you the truth, I still had no idea what was going on with transaction cycles and the audit procedures that go with them when I walked into the exam. For some reason it was just not clicking in my head. My advice would be to get where you can narrow down multiple choice to two answers and be able to make an educated guess. As far as the sims go, just try and use the research tab and try to pick the best answer with the knowledge you have. I wouldn't concentrate all of your time on A4 but you should definitely put some effort into it. Some stuff is fairly easy but some is difficult. Try to memorize what procedures are performed for a certain assertion. I was really worried about that section going into the exam because I could not make sense of most of it but I ended up passing and actually scoring stronger on the exam mcq part on audit procedures according to my score report. Becker questions were definitely harder than the exam questions, the sims were a different story though.

BEC - Feb 2012: 80
AUD - Feb 2012: 84
FAR - Apr 2012: 78
REG - May 2012: 90

Thanks Becker!

[jenuno01]

In order to understand Transaction Cycles, you need to master directional testing (Vouching vs Tracing). You mentioned, you're using Becker? Be very familiar with the Flow charts in the book, these help a ton while you're doing the MCQs, other than that, repetition is key! I remember also freaking out with those 120 MCQ lol, after awhile, it will click! Here are the notes I took, may help you out!

Audit Procedures by Transaction Cycle:

*Bank Cut-Off testing!! – obtain the bank cut-off that includes trxs for 10 to 15 days AFTER year-end. The outstanding checks & deposits in transit at yr-end in on the bank recon should agree w/ the info in the bank cut-off statement.

*Check kiting=low average balance compared to high level of deposits

*Bank Confirms= check both the cash in bank w/ collateral for loans (in the same form)

-May not be useful bc bank employee may not know all the financial relationships w/ the client

*Upon receiving checks in the mail=prepare remittance list (duplicate listing of checks received)

**1ST-Shipping Doc 2ND- Invoice

*Shipping docs to Invoice= to ensure proper billing

*Invoice to Shipping= to ensure proper shipment

*Observing the mailing of monthly stmts= Existence assurance & Rights/Obligations assertions

*Marketable Securities=After looking @ negotiable securities, obtain an acknowledgement from the client that the securities were returned intact.

-2 officials should have control and should be kept in a bank safe-deposit bank

-Confirm the # of shares owned held by an independent custodian much

-When client uses a trust company as custodian of its mktble securities, the Trust company should have no direct contact w/ the employee whom maintains investment accounting records

*Use negative confirmations when AR, CR, IR is low

-Negative confirms does not provide explicit evidence

*Test dividend income by looking @ investment advisory services

*When you assess CR @ a low level, you do TOC and a limited amount of trx testing (SUB tests) (mainly just recalculate payroll accruals

*Payroll= the most common test is to compare payroll costs w/ entity standards or budgets

-Occurrence in Payroll= make sure checks are issued to valid employees – observe SoD in HR & Payroll

-Supervisor should approve time cards to ensure pmts are for work actually performed

*PP&E Testing=

-To test recording Retirements=Vouch from GL/insurance/tax records to Plant -(You see that Equipmt is fully depreciated per the GL, so you want to make sure they are no longer using the Equipmt)

-To test recording Additions= Trace from Plant to GL (You see Equipmt in plant and want to make sure it is recorded in the GL)

*Inspecting loan agreements under which inventory is pledged = completeness w/ respect to presentation and disclosure

*Test inventory valuation by= testing the computation of overhead rates

*Repairs & maintenance account= to check that all expenditures for pp&e have not been charged to expense because in all reality, they should be capitalized

*Periodic inventory counts are used to adjust the perpetual inventor records

*When client uses derivatives: understand the economic substance of each derivative and the risk exposure to determine whether they need to recognize any losses

*In a reasonableness test= data in two or more fields are checked for consistency

**Inventory=Trace from auditor/tag test count sheet to client's Inv listing=Completeness

Trace from client's listing to auditor/tag count= Existence/validity

***To check COMPLETENESS OF INV= do cutoff of shipping & receiving

*Analyticals indicate a lower than expected return on equity method investment= caused by an error in recording amtzn of the excess of the investor's cost over the investments book value

Class of 2012

[scottiet]

A4 was difficult, I would re-watch and re-read the sections multiple times. If you've never been involved in an audit this section is very confusing. I'm in private accounting and while I was learning this section we were in the middle of an audit. I was able to ask them a lot of questions as well as see the processes performed infront of me.

One part of A4 kept on giving me problems, see below for my questions and the academic support below.

Becker Question Code CPA-####: 02443

Page Reference: A4 – 34

I'm confused by the compleness and Existence,Occurrence prodecures. At the top of the page Gearety hand writes a diagram describing the client physical inventory report and using completeness and existence for the CPA counts and company tags.

The questioned I referenced seems to be the opposite and thats why I thought letter A would be the correct answer.

TO GAIN ASSURANCE THAT ALL INVENTORY INTEM IN A CLIENT'S INVENTORY LISTING SCHEDULE ARE VALID, AN AUDITOR MOST LIKELY WOULD TRACE…….

Now if im TRACING that would be COMPLETENESS…… so I would be going from the CPA TEST COUNTS/COMPANY PRENUMBERED INV TAGS TO the CLIENT PHYSICAL INV REPORT LIST.

Correct Answer C: seems to be testing for existence.

First thing on this type of question is that the examiners use the words tracing and vouching as generic terms and not as an indicator of the direction of the testing that needs to be done. In fact, usually the 4 possible answers will have two of each type as choices.

Second is that in order to answer these questions effectively you need to be able to step away from the book and ask yourself – What am I trying to accomplish? In this case, you are wanting to see whether the inventory listing is valid. So, if I am trying to prove the inventory listing is valid, I need to start with the listing itself. Answer C would follow as the correct answer, but just to prove your point, you are checking the validity of the listing, so you would go to the source.

To me, existence, completeness, etc. are nebulous definitions that I try to stay away from unless I specifically need to know to answer the question. Auditing questions, especially those on audit procedures tend to be more based on facts and circumstances and I try to visualize the situation and figure out what I am trying to accomplish.

FAR- 88 2/28/2012
AUD- 88 5/3/2012
REG- 84 7/31/12
BEC- 83 10/19/12

[Anonymous]

kiddos…A13 was my nemesis…

[KassiusKlay]

@jenuno01 has it spot on. Tracing and Vouching are keys. If you're using Becker 2012 A4-10, that diagram helped me the most. If you start with source docs, you are looking for understatements, basically making sure they are being given coverage in the F/S. Then you have to think what would management NOT want to show on the financials? They would most likely understate expenses and liabilities. If you start with financials or TB or GL items on the other hand, you want to vouch back to source docs. Reasoning here is you want to make sure everything on the financials is actually real and does exist. Something can be put on the Financials but to make sure it is real you have to find the source docs. What would management overstate? Assets and revenues. If you study that chart it should be some help. But honestly I did well on Vouching and Tracing but was still iffy about the rest of the assertions. Seriously just re-read A4 over and over. Sorry if I confused you but its the way I understood it.

Form is temporary, class is permanent.

Audit 4/19/12 - 77
BEC 5/31/12 - 75
FAR 8/30/12

[jenuno01]

@Kassius – I would be very very surprised if you didn't score above an 80 😉

Class of 2012

[KassiusKlay]

@jenuno01 🙂 I really really really hope you are right. I have never studied for anything quite like audit, well I havent got to FAR yet. and tell you the truth you can master Becker or Wiley or whatever but NASBA/AICPA know exactly the material we are studying. So I figured that we have to get a concept of the material and understand it rather than trying to memorize everything. Im studying for BEC right now (Becker again) and it is all over the map! Internal control to Job costing to economics I havent studied in years!! I feel like BEC is everything they were left over with and just threw it together, haha. Cheers : )

Form is temporary, class is permanent.

Audit 4/19/12 - 77
BEC 5/31/12 - 75
FAR 8/30/12

[rezaking]

jenuno01.. I havent gotten my score yet but let me thank you so much in advance because your notes are the reason for a passing score (if i got it) .. they were very helpful, so thank you. Wish you had that for REG and FAR too haha.. im studying for REG now but ive given myself plenty of time to take it.

BEC - Passed
REG - 7/21/2012
AUD - 8/18/2012
FAR - 11/10/2012

[jenuno01]

@rezaking – very glad to hear!! I haven't taken REG yet… I do have some for FAR but they're not typed up 😉

I'll be rooting for you on score release date! Keep me updated!!

Class of 2012

[Anonymous]

A4…….

[Anonymous]

I just finished the MCs for the transaction cycle part of the chapter. Got 60% on it…….. Here's to hoping I do better in this topic. This topic is so confusing.

[Author]

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