[jeff]

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Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Anonymous]

Well, got an 82 and 80 on both Becker Final Exams. First CPA Exam ever tomorrow!

[NYCaccountant]

@mjp44 It states, “test of controls”, which means either inquiry, re-performance, inspection, and observation. The only choices which have these are choice B and choice D. The other two are substantive procedures. Choice D states the cash has already been recorded, but it's testing employees access to cash, which is not testing to see if all cash has been recorded. Choice B makes sense because by the observing the use of the tape register, you can be reasonably be assured that all sales and cash are being counted.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[willpassby2014]

NYCaccountant

Do you have thumb rule to differentiate substantive testing and test of control. I liked the way you analyzed the answer

BEC Passed
FAR Passed
AUD Passed
REG Passed

[NYCaccountant]

I look at it this way – Tracing, vouching, sending confirms, analytical procedures, letter of inquiry (which I guess is confirm), recalculating, reconciling schedule against ledger, examine evidence provided by client, third parties (reading loan documents, looking at bank statements) are all substantive procedures. You are testing the details and thus checking to see if the account is materially misstated.

If am observing segregation of duties, people applying controls, asking management and personnel about controls, inspecting control documentation and then probably re-performing some, I'm testing the operating effectiveness of controls, not necessarily looking for misstated accounts. By testing controls, I'm placing more reliance on the clients internal control to catch errors, so I only need to do limited substantive test and I can be reasonably assured their are no material financial misstatements.

Let me know if has a different opinion or anything to add. This is how I look at it, which I think is correct.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[willpassby2014]

sounds good. Thank you

BEC Passed
FAR Passed
AUD Passed
REG Passed

[iddyrashy]

@NYCaccountant think you nailed it. I like the way you identify test of control.

AUD 89 (07/06/14)
REG 83 (08/27/2015)
FAR 78 (04/27/2015)
BEC 75 (11/13/2015)

TEXAS 2016

[Gabe]

@NYC great explanation…Luckily I've done tons of IC walkthroughs. For others, imagine if someone came to your job and asked you to walk them through what you do everyday. They would observe, ask some questions (inquiry), look at some documents (inspection) to make sure what you say lines up with the internal control questionnaire. Hope this helps some folks as well.

CPA, CFE
CISA- Experience will be completed by August 2016

[NYCaccountant]

@Gabe I look at a walkthrough as like me just assessing the situation, basically assessing control risk and then deciding on whether to test controls and apply limited substantive tests, or just skip controls all together and do only substantive tests. I look at assessing control risk as part of me getting an understanding internal control, and then I'll document that understanding using a questionnaire, memo, or flowchart.

Understanding of entity, environment, internal controls is the baseline for me determining the types of audit procedures (Nature), the timing (interim, or year end) and the Extent (How much testing). I'm thinking this is correct, but since @Gabe you have auditing experience, let me know if I am wrong.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[Gabe]

@NYC you're correct.My use of questionnaire is different I think….When you were talking about questionnaire you were speaking of something auditor prepared, correct? What I meant was something the client prepares before the audit that auditors review in planning…hope that helps.

CPA, CFE
CISA- Experience will be completed by August 2016

[iddyrashy]

I hate month end closing, now i cant study at work…. lol

AUD 89 (07/06/14)
REG 83 (08/27/2015)
FAR 78 (04/27/2015)
BEC 75 (11/13/2015)

TEXAS 2016

[NYCaccountant]

I have a half day tomorrow, so planning on putting 5 hours in. I really need to focus on agreed upon procedures, governmental stuff. On Friday, I might be able to put 8 hours, but I tend to get distracted, so we'll see. I just looked at the calendar and see I still have a lot of time left. Def. not moving my test date up or back because I feel the date is perfect and the wait time is very short. I am doing month end stuff as well @iddyrashy, But I was able to get my hour of MCQ's in lol.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[iddyrashy]

@NYCaccountant I think agreed upon procedure is somehow clear, GAGAS is no man land for me. I understand the different one of the different between GAAS and GAGAS is testing of control as part of the scope of audit, however when they incorporate single audit and all other nonsense I get very frustrated.

So i spent two days on Internal Controls, today I plan to review comfort letter and attestation standards on Pro forma and prospective financial. I am taking half a day tomorrow, I have no July 4th and Saturday I will study half a day. Sunday 8am, hands down.

AUD 89 (07/06/14)
REG 83 (08/27/2015)
FAR 78 (04/27/2015)
BEC 75 (11/13/2015)

TEXAS 2016

[Anonymous]

Ok, I'm confused! Someone can clarify this for me please?

Test of controls= internal control testing? And if internal control is weak we stop testing controls and do more detail/substantive testing. If internal control is strong we do substantive tests and some control tests? So when do we assess the risk? before it? Based on our understanding of internal control or entity environment? So what do we do to understand entity environment?

Waw so many questions:)))

[Anonymous]

So, answering my own question:) I was looking for my answers in AL and that is what was found:

“The risk assessment procedures should include the following:

a. Inquiries of management and 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. .A6Open this link as a new document)

b. Analytical procedures (Ref: par. .A7–.A10Open this link as a new document)

c. Observation and inspection (Ref: par. .A11Open this link as a new document)” .

But aren't the inquiries, inspection, observation control procedures? And analytical procedures are kind of substantive procedures?

[iddyrashy]

Internal Control testing audit to my understand is a process where an accountant is engage to test effectiveness of internal control. This is required by issuer under SOX. Test of control, under GAAS the auditor is required to understand environment and internal control in order to do risk assessment. So, when risk assessment shows control risk on certain assertions is below maximum the auditor is required to test the control to justify that conclusion. For instance, auditor concludes base on inquiry and review policy and procedure the control risk on inventory is below maximum, then he is supposed to test that control in order to justify that level of risk. So, test of control is a subset of internal control testing. You test certain areas that you need base on the assessment.

So if during risk assessment the auditor come into a conclusion that the control risk is maximum then there is no need to relay on internal control, therefore the auditor perform only substantive testing. If internal control seems to be strong during assessment then auditor is suppose to test controls to justify that effectiveness and if it's as appeared on paper the auditor adjust substantive testing.

To understand environment includes things like industry, regulatory and other environment factors. However, you will also need to understand entity which includes things like objective and strategies, measurement and review of performance indicator.

Internal control understand includes the five components control environment. risk assessment, information/communication, monitoring and existence control.

Those few questions can take pages to explain.

AUD 89 (07/06/14)
REG 83 (08/27/2015)
FAR 78 (04/27/2015)
BEC 75 (11/13/2015)

TEXAS 2016

[Author]

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