AUD Study Group Q1 2015 - Page 34

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  • January 9, 2015 at 3:23 pm #650284
    Anonymous
    Inactive

    Better management than lawyer

    also, management does determine materiality limit in representation letter (I think)

    January 9, 2015 at 3:36 pm #650285
    ruggercpa2b
    Participant

    I just read the question and it says “reached an understanding of materiality” not determine materiallity. The auditor determines what is to be deemed material. When you send out the lawyer's letter that is the auditor corroborating whatever management has told them regarding litigation and claims. So in essence that is between the lawyer and the auditor.

    At least that is how I interpret the question.

    AUD - 73, 72 retake 7/2/2016
    BEC - 8/20/2016
    REG - TBD
    FAR - TBD

    I am so ready for this nightmare to be over. Been at this way too long.

    January 9, 2015 at 3:45 pm #650286
    Anonymous
    Inactive

    Have you read the source though?

    “provided the entity and auditor have reached an understanding on the meaning and limits of materiality for purposes of this letter and management has communicated such understanding to the legal counsel.”

    So first the entity and auditor reach understanding and then auditor reaches understanding with lawyer? It just doesn't sound right

    I think the answer must be wrong

    January 9, 2015 at 3:59 pm #650287
    ruggercpa2b
    Participant

    The auditor and management reach an understanding on the financial statements as a whole. Within those are if there are any claims and litigations. The auditor then reaches an understanding with the lawyers on what is material in regards to claims and litigations and the auditor making sure that those numbers are properly disclosed.

    The lawyer can only talk about what is material to the financial statements. If the client has other pertinent business going on with the lawyer that would not affect the financial statements then the lawyer does not need to have to divulge that information to the auditors.

    AUD - 73, 72 retake 7/2/2016
    BEC - 8/20/2016
    REG - TBD
    FAR - TBD

    I am so ready for this nightmare to be over. Been at this way too long.

    January 9, 2015 at 4:02 pm #650288
    ruggercpa2b
    Participant

    I did a google search and I think this Wiley text explains this question much better. Its question 130. It shows how the eliminated the answer choices.

    https://books.google.com/books?id=TmWyAwAAQBAJ&pg=PA294&lpg=PA294&dq=AUC+501&source=bl&ots=845W-GlPlV&sig=e7mPvBxxDnOh5S5dj6WgrSi0JGY&hl=en&sa=X&ei=2fqvVLPCK8ygyASmwIDICg&ved=0CCsQ6AEwAg#v=onepage&q=AUC%20501&f=false

    AUD - 73, 72 retake 7/2/2016
    BEC - 8/20/2016
    REG - TBD
    FAR - TBD

    I am so ready for this nightmare to be over. Been at this way too long.

    January 9, 2015 at 5:03 pm #650289
    Anonymous
    Inactive

    They “quote” AU-C 501, but there is no actual quote like that in there. The quote is “entity and auditor have reached an understanding on the meaning and limits of materiality”.

    I think wiley f..d this up and other review courses, you know, googled it and assumed it was correct

    January 9, 2015 at 5:51 pm #650290
    NoraU
    Member

    PCAOB site:AS2505

    .12 A lawyer may appropriately limit his response to matters to which he has given substantive attention in the form of legal consultation or representation. Also, a lawyer's response may be limited to matters that are considered individually or collectively material to the financial statements, provided the lawyer and auditor have reached an understanding on the limits of materiality for this purpose. Such limitations are not limitations on the scope of the audit.

    BEC 05/12/14 77
    REG 08/25/14 82
    FAR 11/25/14 80
    AUD 02/25/15 72, 05/15/15 98! DONE!!!!!!!!!!!!!!!!!!!!!!

    January 9, 2015 at 6:02 pm #650291
    ruggercpa2b
    Participant

    I just went through CPAexcel and found that same question. According to CPAexcel the correct answer is A client and management. So, that except from the Wiley book is wrong.

    The client and the auditor should reach an understanding about materiality. This understanding is then communicated to the attorney who will limit his/her response accordingly.

    AUD - 73, 72 retake 7/2/2016
    BEC - 8/20/2016
    REG - TBD
    FAR - TBD

    I am so ready for this nightmare to be over. Been at this way too long.

    January 9, 2015 at 6:12 pm #650292
    salring
    Participant

    @Ruggercpa did you mean the entity/management and the auditor?

    January 9, 2015 at 6:28 pm #650293
    Anonymous
    Inactive

    NoraU,

    For some reason Wiley and Ninja reference AU-C 501, not PCAOB

    This question should be considered invalid, I give up and move on!

    January 9, 2015 at 6:41 pm #650294
    ruggercpa2b
    Participant

    @sarling Yes its the entity/management and the auditor reach the understanding. At least according to CPAexcel.

    AUD - 73, 72 retake 7/2/2016
    BEC - 8/20/2016
    REG - TBD
    FAR - TBD

    I am so ready for this nightmare to be over. Been at this way too long.

    January 10, 2015 at 12:45 am #650295
    jstay
    Participant

    exam is next thursday and i dont feel confident at all.

    whos using ninja? hows everyone tending?

    im at 77% and probably 75% done with the adaptive learning phase

    January 10, 2015 at 1:08 am #650296
    Anonymous
    Inactive

    i am trending 88 now but didn't get to review phase. going to switch to gleim to try some new questions and sims

    January 10, 2015 at 1:10 am #650297
    Anonymous
    Inactive

    Why? According to my book, predecessor should read F/S, obtain rep letter from successor and client

    When the auditor reissues a report of the financial statements, the responsibility of the auditor with respect to the reissued report is which of the following?

    The auditor:

    A. should adjust the financial statements as needed or qualify the opinion.

    B. must disclaim an opinion.

    Incorrect C. should perform additional audit procedures under certain circumstances.

    D. has no responsibility in this case.

    You answered C. The correct answer is D.

    When the auditor reissues a report of the financial statements, the independent auditor has no responsibility to make further investigation or inquiry as to events which may have occurred during the period between the original report date and the date of the release of additional reports.

    January 10, 2015 at 1:49 am #650298
    Anonymous
    Inactive

    How can A possibly be correct? There is nothing about qualifications of the entity's accounting personnel in AR 90, how can it be most likely included

    To compile financial statements, the accountant should possess a general understanding of the nature of the entity's operations. This most likely will include which of the following?

    Correct A. Stated qualifications of the entity's accounting personnel

    B. Design of the entity's internal controls placed in operation

    C. Risk factors relating to misstatements arising from noncompliance with laws and regulations

    D. Internal control awareness of the entity's senior management

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