[jeff]

Free Study Planner, Notes, Audio, Flashcards: https://www.another71.com/cpa-exam-study-plan/

Free CPA Exam Survival Guide: https://www.another71.com/cpa-exam-survival-guide/

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

[iddyrashy]

Analytical procedure assist audit during risk assessment to determine risk areas. Let says you have P&L of the client and you prepare a comparison analysis on revenue on monthly basis and it shows June and November the sales doubled, base on that small hint you decide to say something here doesn't look right, I need to do more work to determine why sales doubled. That is how analytical procedure can used risk assessment.

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

TEXAS 2016

[NYCaccountant]

Testing controls is different than risk assessment. Do it in this order:

Assess control risk (which basically means obtaining an understanding of the clients internal control) – Inquiries, observations, inspections, tracing transactions through the account records. Once I'm done with this assessment, I have an idea of what the control environment is with the client, I then either choose to test controls and perform limited substantive procedures, or just perform substantive procedures.

The assessment is just me understanding where the company is weak and designing test as a result of that.

If I assess control risk to low, that means I need to do less substantive testing, which saves me time. Control risk being low means that I will be relying more on the internal structure to prevent misstatements. If I assess it to be high, then it's the inverse situation. if controls risk is high, there is no need to bother testing controls, because 1. I deemed to be weak and 2. it would inefficient. in this case I'll just perform only substantive procedures as this would much provide much assurance than weak controls.

Analytical procedures can be used as substantive test, part of risk assessment and part of reviewing the audit for reasonableness . In regards to analytical procedures for substantive tests, their effectiveness depends on the type of assertion being tested, the reliability of client data, plausibility of the relationships and the precision of the expectation created by the Auditor.

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

[Anonymous]

@iddyrashy

Ok, tnahks a lot!

So, after you do this

“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. ”

you assess the risk, right? What about the procedures for understanding environment? Is it only analytical procedures or also observation, inquiries, inspection and that is how we assess the risk? So , like NYCaccountant said before, doing all these procedures means understanding the environment and assessing the risk?

I'm confused about what goes first:)

First, we understand envir. , second, assess the risk, third either do test of controls and subst. test/or just do subst. test?

I'm very sorry asking so many questions and may be sound confusing. Thank you all so much for your help!

[Anonymous]

Thank you so much you all, my greatest and the only support!

Wow, I cannot believe how clear it is to me when I read what you wrote and how it is confusing when I start thinking of it more and more. My accountant teacher used to say me that I was thinking too deep into the problem. For some reason I start panicking.

Thank you!

[Anonymous]

1 more day till this is *hopefully* over for me. I am getting exam jitters! Eek.

[TNDCPA]

Can someone help me differentiate when to disclose vs when to make an adjustment to the books for a subsequent event. I seem to be getting two different answers when reviewing with CPAExcel vs WTB, unless I'm assuming these two problems are the same when they in fact are not.

CPAExcel indicated an accounts receivable balance was present at the YE balance sheet date and a disaster happened after the BS date causing the customer to file bankruptcy. This would be considered subsequent event w/ disclosure only.

WTB indicated an AR balance was present at YE BS date and after the BS date a customer filed bankruptcy. This would be considered subsequent event w/ adjustment to the books.

Why would one be considered disclosure only, when both in fact happened leading to “new or better info about circumstances that existed at B/S date”? Could someone please help clarify when to adjust and when to provide disclosure only.

Also, is my understanding correct in that a subsequent event is one that occurs after the BS date but before the audit report has been dated, while subsequent discovered fact is one that occurs after audit report date but before released to the public?

FAR - 89 02/27/14
REG - 88 04/30/14
AUD - 90 7/3/14
BEC - 87 8/30/14 DONE!

[Anonymous]

@NYC..,

may I also ask you, today you were saying :

“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.”

All these procedures for testing effectiveness of controls? Is it required procedures according to SOX and we do those tests only for issuers or non-issuers when we do attest services?

Also, if we assess the risk as low and we do test of controls what are the procedures for it? Is it inquiries, observation, re-performance, and inspection or I'm missing something again?

[NYCaccountant]

I have not read anything that stated tests of controls were different for private companies compared to public. The thing is, you would always test controls for public companies because you have to express an opinion on there operating effectiveness. For private companies, you need to have an understanding of controls, and performing tests of controls is optional and largely dependent on whether control risk is high or low. Test of of controls is inquiries, observation, re-performance and inspection.

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

[Anonymous]

OK, I think I got it, or at least part of it, I hope enough to pass this time!:)))

Thank you so much, NYC.., nice outside, right!:))

[NYCaccountant]

ehh, outside is horrible lol. I actually got caught in the rain and ended up soaked. Time to study for two hours.

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

[mjp44]

@TNDCPA…I know that there are two types of subsequent events..type 1 and type 2. Type 1 are events that occur at balance sheet date but before the financial statements are released and require adjustments to the financial statements. Type 2 are events that occur subsequent to balance sheet date and before financial statements are released that mainly require just a disclosure. In regards to your 2 examples, they are pretty similar, however, the “disaster” most of been unusual or infrequent and occurred AFTER the balance sheet date. Because it was an event that occurred after the BS date that caused the bankruptcy, i think it is only a type 2 and only disclosed…. Im not totally certain this is why it is disclosed.

In the 2nd example there is an A/R balance existing at the balance sheet date but thereafter the client declares bankruptcy ,therefore a financial statement adjustment is needed because that A/R balance at the balance sheet date is not accurate.

FAR- PASSED (11/13)
REG- PASSED (2/14)
BEC- PASSED (5/14)
AUD- PASSED (8/14)

If it's important to you, you will find a way. If it isn't, you will find an excuse.

[riceperson]

So wondering if anyone could help me out

Which auditor opinion can be given when that auditor has a scope limitation relating to a public company engagement on whether a previously reported material weakness continues still exists?

Disclaimer, Qualified, Both, or None

>

>

>

>The answer given is Disclaimer only. I thought the answer was FOR SURE Both, but I can't find in either of my books (wiley and roger) where it states that it can only be a Disclaimer.

FAR 69, 83
AUD 85
BEC 80
REG 82
FINISHED

[Gabe]

@rice I got the same question and I also thought it was both. I believe the explanation says Qualified isn't allowed? Anyone help us out?

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

[Gabe]

Can anyone break down agreed upon procedures for me? I'm struggling with it, probably because I've never had to deal with them at work haha.

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

[Anonymous]

QUESTION:

In an audit of an issuer, the auditor must provide an opinion on which of the following.

1. The Financial Statement

2. The Audit Committee's oversight of financial reporting and IC

3. The effectiveness of internal control

I though the answer would be only “1′, but it's actually “1 and 3″….

When do we provide an opinion on the effectiveness of IC? Because in the Becker “MRDIMREPPORTSCRAME”, it is explicitly stated that no such opinion on IC is expressed.

Someone please clear this up for me. Thanks.

[Author]

Replies