[jeff]

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

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

[Gabe]

@NYC that is what I am doing with Ninja. I have done all the of the questions. Trending score is 91%, actual is 80%…just keep drilling those questions! When do you sit?

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

[NYCaccountant]

@Gabe I sit next Saturday, the 19th. Hopefully my last exam ever.

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

[iddyrashy]

@NYCaccountant No, I only did once. I have a problem of memorize answer and that can be unintentional and that is why I had three different test bank sources.

Keep doing Ninja, WTB is good but you better hope the exam will be normal exam. If you can be familiarized with AU-C codification from AICPA, that can be very helpful on SIMs.

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

TEXAS 2016

[Anonymous]

Can someone please help me with the the concept of “allowance for sampling risk”?

By saying “the auditor is willing to accept 2% of risk”, allowance for sampling risk is not 2%?

I am asking b/c of this questions:

An auditor uses an attribute sampling plan to determine whether large expenditures are being properly approved. The auditor is willing to accept a 2% risk of assessing control risk too low, and has a tolerable rate of 5%. A sample of 100 invoices is selected, and only one is found to be lacking appropriate approval. One invoice selected by the auditor cannot be located. Which statement is true?

a.

The invoice selected by the auditor that cannot be located is ignored in the calculation of the sample deviation rate.

b.

There is not enough information given to determine whether the auditor should rely on this control.

c.

Since the sample deviation rate is less than the tolerable rate, the auditor should rely on this control.

d.

Since the auditor has a tolerable rate of 5%, he or she can be 95% certain that he or she will make a correct decision.

The correct answer if B.

Choice “b” is correct. The missing invoice should be counted as a deviation, resulting in a 2% sample deviation rate. However, this information alone is not sufficient to determine whether the control can be relied upon. The auditor would also need to know the upper deviation rate (or the allowance for sampling risk, which would allow the auditor to calculate the upper deviation rate). It is the upper deviation rate that needs to be compared to the tolerable rate in making decisions.

[NYCaccountant]

Allowance for sampling risk is a cushion you add to the deviation rate to the sample just for safe measure. The deviation rate is 2% and say I make my allowance 4%, my upper deviation rate would be 6%, which would mean that I should not rely on the controls because deviation rate is more than the tolerable rate. I believe they have tables where you take the allowance for assessing control risk to low and look up how much of an allowance for sample risk you should include. I think that's what the reliable table is for.

Allowance for sampling risk is just adding cushion to make the estimate more reliable.

Just like for PPS, they have base precision and allowance for incremental projected misstatements, which both act as a cushion to make the sample more reliable.

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

[Anonymous]

So from what i understand,

Allowance for sampling risk is usually given in the question

Deviation rate= sampling risk

Risk of assessing control risk too low/risk of incorrect acceptance is usually used to decide the sample size?

These terms are really confusing for me.

[NYCaccountant]

Allowance for sampling risk + Deviation rate = Upper limit

Upper limit is compared to tolerable rate and that's how you determine if the control should be relied upon or not.

Acceptable level of risk or on technical terms, Acceptable allowance for assessing control risk to low is one of the elements used to determine the sample size, not the upper limit (Deviation rate + cushion for sample risk)

That's how I look at it.

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

[iddyrashy]

I can't quit coming to this study group

@coocooper as NYC explained above think this way, if you 1,000 invoices in your sample, you came to a conclusion 5% is your sample deviation. That means 50 invoices have some kind of errors, but your not certain sure that it's 50 invoice, it can be 40 or 60 invoice if you search 100% of the sample. So you plan for the worse scenario you decide to add 2% to your 5% deviation rate that give you 7% upper deviation means that your certain 95% that if you review all invoices you will find errors in either 70 invoices or less. Now that 2% is allowance for sampling risk

Sampling Risk is more than deviation rate, so you can't say those two are equal. Sampling risk is a risk that your sample size is flawed. Say on those 1,000 invoices you selected they're not representing the sample, means after reach your conclusion and if you chose to test 100% of population you will come back with a different results.

Confusing staff

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

TEXAS 2016

[lsutigers03]

Until I started doing the Ninja SIMs I never payed attention to whether the question was asking for a section or a paragraph. I've always just given the most detailed answer which is the paragraph. Then I was getting Ninja SIMs wrong because I would give the paragraph when it was asking for a section. Does the real exam work the same way? Meaning if you're asked to give the section and you give the correct paragraph in the correct section it's marked wrong? I assume this is how it is but I just thought I would ask. Also is it safe to assume that if you get two research questions one of them is pretest?

REG - 78
BEC - 74, 67, 69, 69, 70, 79
FAR - 76
AUD - 69, 69, 69, 74, 85

Licensed Louisiana CPA

“You never fail until you stop trying.”
― Albert Einstein

[Anonymous]

thank you both @NYC and @iddyrashy, it makes all sense now.

[Anonymous]

Inherent Risk is usually a risk that a company cannot control, even with all of the right controls in place (like a change in the stock market). Control Risk is the risk that the controls in place are not working properly or that maybe there aren't controls in place that could help a potential risk situation.

Look up the examples of inherent & control risk on the AICPA website. It's really helpful.

[tgwadez11]

@CarneAsada Thank you. Kind of makes sense. Anything outside the entity control affects inherent risk, within the entity control affects control risk, and anything that helps the auditor affects detection risk. Am I correct by saying that?

Can you/someone please give me an example of a situation that would affect the different attributes of audit risk and whether it would increase or decrease said risk? For example, a newly hired payroll clerk…increase control risk since this employee is new???

Also, where on the AICPA website are examples? I guess I'm not seeing them, sorry.

AUD (PASSED) - 56, 91
BEC (PASSED) - 80
REG (PASSED) - 68, 74, 77
FAR (PASSED) - 78

[Anonymous]

This site doesn't like it when you post links, so I suggest that you Google “aicpa inherent risk.”

The first aicpa link that comes up should show section au 312. Go to page 1652 for some examples. The whole document is a good read though.

[mjp44]

I would argue that hiring a new payroll employee affects both inherent and control risks. I would think that having a greater number of employees has an inherently higher risk of a material misstatement due to human error or fraud. Additionally, it could increase control risk because this is another employee to monitor inorder to prevent/detect and fraud or error which causes material misstatement. They kind of go hand in hand, in my opinion…if IR increases-> control risk should be higher as well and vice versa. I could be totally wrong though in my thought process.

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.

[Anonymous]

Hi, everyone, how is your studying?

Back to tgwadez11's question about the risks. What does affect the audit risk? If we, for example, have to define some kind of situation can affect the risks independently? Not taking into consideration holding AR constant. If, for example, we know that economic downturn or getting some risky securities increase IR risk, do we assume that it also would increase AR (taking those two risks independently, not holding AR constant)?

Thank you!

[Author]

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