[jeff]

Welcome to the Q3 2017 CPA Exam Study Group for AUD. 🙂

Introduce yourselves and let your fellow NINJAs know when you plan to take your AUD exam.

The Five Steps (NINJA Framework): https://www.another71.com/pass-the-cpa-exam/

[Anonymous]

Can someone help me understand the position of the basis for opinion paragraph?

It seems that this is included preceding the opinion paragraph if the opinion is modified – qualified, adverse, or disclaimed.

When is it included AFTER the opinion paragraph, or is it ever?

Thanks in advance.

[jtvande]

Does anyone know where I can find a good chart or something for the flow of the AUD and everything it involves. I am a very visual person and I think seeing where different things happen and the timing of everything would help things click for me.

Thanks,

[ThomasHallberg]

@emsmith, the basis for opinion paragraph is before the opinion paragraph always. I am really not sure why it is.

[Anonymous]

@ThomasHallberg

Thanks so much

[Anonymous]

More help please:

Can someone help me differentiate between these types of risk?

Risk of Incorrect Acceptance/Rejection
Risk of Assessing Control Risk Too High/Low

Both (seem to) have to do with making an assumption based on a sample that the account balance is either fairly stated when it's not or not fairly stated when it is. Is the difference between the 2 that the ones related to control risk have to do with that assumption being made about the quality of the controls either being better or worse than they actually are, and the acceptance/rejection one has nothing to do with controls?

If so, what sort of wording would help to indicate one way or the other? I guess that's what I'm struggling with.

Hope this makes sense. My brain has stopped working.

TIA.

[ThomasHallberg]

Okay lets see if this helps!

The risk of incorrect acceptance/rejection relates to substantive tests / variable sampling. The risk of incorrect acceptance is the auditors worst fear. The auditor thinks that the substantive test are free from material misstatement when in fact, they are not. Thus leaving the auditor with a possible wrong opinion on an audit, this is a complete lack of effectiveness. This is the BAD risk AKA BETA RISK.

The risk of incorrect rejection isn't as bad. However, it is inefficient. This is where the auditor believes the substantive testing/variable sampling is material misstated, when in fact, it is free of material misstatement. This causes the auditor to preform more work, thus being inefficient. This is the ALPHA risk.

On the flipside, with Attribute sampling, aka risk of Assessing Control Risk Too High/Low.

The Risk of Assessing Control Risk Too Low is the BAD risk AKA BETA risk. This is when the auditor believes controls are operating effectively (preventing and detecting material misstatements) when in fact, they are not. The auditor will rely on these controls and things will get messy possibly resulting in a faulty audit opinion. Complete lack of effectiveness.

The risk of assessing Control Risk Too High is being inefficient. The ALPHA risk. The auditor believes the controls are not operating effectively and chooses not to rely on the controls, when in fact the auditor could have. This ALPHA risk is not nearly as bad as the BETA risk, however both cause major issues to the audit. Hope this helps!

[PTBP2018]

Hey everyone!
I took Audit yesterday. Without going into detail or breaking the rules, I felt that both the MC and SIMs were reasonable. This was my first attempt at Audit. Before passing a single test, I have 5 recorded fails between BEC and REG. I passed those (finally) and moved on to Audit. I have taken one course in Audit…maybe 10 years ago. Audit is incredibly foreign to me. This prep course was particularly frustrating to me, because I couldn't put the puzzle together until after I had finished the material. Even then, I felt like there were holes of information that were missing.

I read a blog on here that was particularly helpful. Someone, who had failed Audit a few times, mentioned that she changed her approach. Like myself, she was using Becker. She recommended to read the book again and take notes – close to your exam date. I was skeptical, because for me, the best time to cram on the MC & SIMs has been the week before the exam. I decided that…she must be saying this for a reason. Another person recommended, “Read the book until you throw up.”

So I did it. I went and got a 3 ring binder and a box of plastic sheet covers. I started reading and took notes – only on the most important points. I wrote outlines for all of the reports – for all attest and non-attest reports – and for all opinions. I used different colors to highlight where things were different from the unmodified reports. I took all of those long charts shown in the Becker book – and I condensed them into multiple shorter charts (smaller bites). I finally finished my notes on the night before the exam – late in the wee hours. This process really helped me to “fill in the holes” in the Audit puzzle. I was extremely nervous about my approach – because each day, I may have done…maybe 30-60 MC questions max, and a few Sims. Usually, I do a lot more. I don't typically take the practice exams because for me, they are a confidence killer, and I can't focus on one task for that long, unless it's the actual test.

So yesterday morning, I drove to the Prometric Center, about 3 hours early. I reviewed my notes like crazy and listened to some upbeat music. It was nice having my notes all organized for once, given that I was in the car. I went into my exam, and found the first testlet to be pretty reasonable. The second one seemed to get harder, but I felt prepared overall. In fact, I felt prepared the entire way through.

For me, I don't think that doing a million MC questions would have prepared me as much as it has for other exams. The others were right – read the book until you throw up and take notes on the key points until you want to throw your binder across the room.

Obviously, I don't know if I passed yet, but I felt this advice to be extremely helpful. I felt pretty good walking out of the testing center, which is unusual. If I don't pass, I still have my magic binder to to review!

Thank you Another71, for all of the guidance on this journey so far! 🙂

[PTBP2018]

@emsmith06 – Here is how I wrote that one out:
As an FYI:
*Risk of Incorrect Acceptance* ties to *Risk of Assessing Control Risk Too Low*. If there is a risk of assessing CR too low, you will want a bigger sample (inverse).
If you can memorize that, you are good.

***Remember that Risk of Incorrect Acceptance is every Auditor's worst nightmare! (Issuing an Unmodified…when the FS are actually Misstated). It's a reputation killer. No one wants to me known as the CPA firm who doesn't Audit thoroughly.

1) Risk of Incorrect Acceptance –> Risk of assessing Control Risk too LOW –> Increase Sample Size (Inverse)
***If you assess CR too low, you might issue an unmodified when there are Material Misstatements in the mix (whoops – can't just hand out unmodified opinions like hot cakes!)
*****Assessing CR too low may be an ineffective approach, because now we look like idiots and our credibility is in jeopardy (to prevent this –> INCREASE sample size)

2) Risk of Incorrect Rejection –> Risk of assessing Control Risk too HIGH –> Decrease Sample Size (Inverse)
***If there is a risk of assessing CR too high, you might issue a modified opinion when NO MM actually exists
***This causes more work, because now we have to go back and fix everything AND the client is pissed! It's not fair to modify when we don't actually need to! Totally inefficient!
***When we assess CR too high – we do *very little* control testing, because we already assessed the controls to be weak…why would we test them?
***When we assess CR high, we tend to rely ONLY on substantive and analytical tests. Unfortunately – we should have relied on the controls (and made our jobs easier) because the Internal Control is stronger than we originally thought.

3) Tolerable Misstatement –> If we will tolerate more risk, then we can make the sample size smaller (Inverse)

4) Expected Deviation –> If we expect a lot of deviations, we should increase sample size (Direct relationship)

5) Variability –> If there is a ton of variability, then we want to increase the sample size to get a better picture (Direct relationship).

Hope this helps!

[golfball7773]

Nice cheat sheet Yackemo17!!

FAR: 63, 55, 62
REG: 65, 77*
AUD: Fail, 64, 71
BEC: 72, 74, 81

*expired

[jtvande]

Anyone have a good way of explaining assertions? I am getting every question wrong when they ask if it is completeness, existence, allocation and valuation, etc. I try to think through it but it is just not making sense to me. It all seems the same.

[ThomasHallberg]

With the completeness assertion you are testing to be sure the entity has captured and accounted for ALL transactions, or events. Pre-numbered documents are an auditors favorite because they are easily able to tell that there are no missing documents or transactions. Another good way to test this is to TRACE from the source documents to the clients journals. Starting at the documents to ensure the entity has them in their systems.

Existence is a little different. You want to be sure transaction, documents, assets, actually exist! You can't really start at the source documents here because if it doesn't exist, there will be no source documents. The auditor would inherently capture everything. So we start at the client journals and VOUCH to the source documents, hoping we catch a transaction or asset that is on the clients books but doesn't exist.

Valuation typically ensures that the client is calculating things correctly (how I think of it). Aka, bad debt write-offs, depreciation expense, etc.

Understandably/classification generally deals with “is the client properly disclosing X&Y.” Classification relating to lets say, the right classification of investment securities as AFS,Trading, or HTM.

Cutoff is just making sure the transaction fall in the right period.

Lastly, rights & obligations relates to, “does the client really own the things they say they do?” I always think if a client has some of their goods on consignment, or even have someone else inventory they are selling on consignment. Who has the rights to these assets?

Hope this helps!

[jtvande]

That helps a lot! I just needed it to be explained to me in a different way. Thanks!

[dave]

@ThomasHallberg Thank you! that was super useful. Taking my test tomorrow! Good luck studying everyone!!

Best,

Dave

[jwalk]

Just took first mock exam for AUD – using Becker. Got a 74…is this a good spot to be at?? Taking exam Sept 8th. No experience in AUD…or anything yet haha

[kerry.buscaglia]

Hi All!

I am really confused…. why can't i search or see anything on the Authoritative Literature? Everything says “wrong path” and I cannot read or get to ANYTHING! Is this a me problem, or something with all of Becker?

Thanks all!

[Author]

Replies