[AndreA]

I would appreciate any advice of how to handle this kind of SIMs. It seems easy when I read about it or watch the lecture, but when I’m trying to practice I end up with 2 right answers..

Select the appropriate Audit procedure used to detect misstatement and Internal control that could prevent or detect misstatement in the future.

The company’s receiving department misplaces receiving reports for purchases of raw materials at year end and therefore liabilities were not recorded.

Answer:
Identify open purchase orders and vendors’ invoices at December 31, year 2, and investigate their disposition. The company’s receiving department is misplacing receiving reports at year end and thereby failing to properly accrue liabilities. The audit procedure that will most likely detect this misstatement is to identify open purchase orders and vendors’ invoices at year end and investigate their disposition. Because the receiving reports are misplaced (and therefore missing), the auditor will only identify the receipts through purchase orders and vendor invoices. By investigating these transactions, the auditor will identify those which were received by 12/31 and can verify whether or not a liability was accrued. The accounts payable supervisor reviews a monthly listing of open purchase orders and vendors’ invoices for follow-up with the receiving department. The internal control that would most likely prevent or detect this problem in the future is for the AP supervisor to review a monthly listing of open purchase orders and vendors’ invoices for followup with the receiving report. In other words, to perform the same procedure that the auditor performed but on a monthly basis.

FAR - 73, 78 (WileyCPAexcel 3,000+ MCQs, 50 SIMs)
AUD - 73, 81 (WileyCPAexcel 3,000+ MCQs, 40 SIMs)
BEC - 71, 71, 74, 84 (WileyCPAexcel 3,000+ MCQs, 10 SIMs)
REG - 84 (WileyCPAexcel 2,000 MCQs, 15 SIMs)

CA Ethics Exam - 94%

NEVER GIVE UP.

[Biff Tannen]

I found the ARC mnemonic quite helpful while I was studying for audit:

Keep the following segregated:

(A) Authorization of transactions
(R) Recording of transactions
(C) Custody of Assets

AUD - 78
BEC - 84
FAR - 79
REG - 85

“An investment in knowledge pays the best dividends” - Benjamin Franklin

[VP]

Hey AndreA, this question specifically seems much more complicated then any Becker/ actual CPA question I have seen but I did figure out how to understand and answer Segregation of duty questions and started killing them on Becker review. I too struggled and the first time I took the AUD exam, this was probably the reason for my downfall. In my second prep, what helped it click so well for me was to draw out the flow charts for each of the cycles. This helped me tremendously because rather than memorizing stuff, I was able to understand how departmental duties flow into one another and how roles are distributed to each department. Then, I would recite the functions for each department back to myself several times to hammer it home. By doing this, you will notice how each department has either authorization, record-keeping, or custody functions and you will start noticing how alot of answer choices mix these 3 functions and that's how you can rule them out easily. Let me know your thoughts!

AUD - 76
BEC - 81
FAR - 80
REG - 80

Mamba Mentality

 

[AndreA]

That is a very good advice if you're able to draw out the flow charts and understand source documents for each department and distinguish functions that should help a lot. Thank you! I already took the AUD and hopefully that advice will be useful for someone who has the same problem.

FAR - 73, 78 (WileyCPAexcel 3,000+ MCQs, 50 SIMs)
AUD - 73, 81 (WileyCPAexcel 3,000+ MCQs, 40 SIMs)
BEC - 71, 71, 74, 84 (WileyCPAexcel 3,000+ MCQs, 10 SIMs)
REG - 84 (WileyCPAexcel 2,000 MCQs, 15 SIMs)

CA Ethics Exam - 94%

NEVER GIVE UP.

[Author]

Replies