[jeff]

Post by Another71.

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

[Kate]

Hey everyone!

Just joined another 71. Taking my first CPA exam on Tuesday- Audit! Absolutely freaking out.

I am using Becker and was wondering how heavily everyone is memorizing these transactions cycles. They are kicking my butt.

I know to test for existence and completeness, you either go from financial statements to source documents or vice versa.

Can someone provide me with a complete list of what exactly source documents are? I keep messing these up. Online it provides me with: cash receipts, credit card receipts, customer invoices, supplier invoices, and purchase orders. Are shipping documents included in here?

Also, getting really thrown off by the whole idea of cost benefit? I feel like especially in Becker, half of the time we are told “yes, the time and cost to do this should be taken into account” and other times it says “the cost to do this should not hinder you from performing certain procedures.” I just get so thrown off by such conflicting explanations, that I find myself memorizing answers rather than understanding the concepts.

AUD (2/3/2015) Pass
REG (4/24/2015) Pass
FAR (8/3/2015) Pass
BEC (10/25/2015) Pass

[NoraU]

@Martin, This is what I found to answer your previous question: AU-C 315..A69 Risk assessment procedures to obtain audit evidence about the design and implementation of relevant controls may include

• inquiring of entity personnel.

• observing the application of specific controls.

• inspecting documents and reports.

• tracing transactions through the information system relevant to financial reporting.

Inquiry alone, however, is not sufficient for such purposes.

I guess with Audit questions every word matters. With risk assessment in general analytical procedures are good, but while checking design etc. of relevant controls they are not useful.

I feel like Audit will kill me…

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!!!!!!!!!!!!!!!!!!!!!!

[Kate]

Can anyone distinguish between the investment cycle and the financing cycle? I haven't taken FAR yet and am SO confused.

AUD (2/3/2015) Pass
REG (4/24/2015) Pass
FAR (8/3/2015) Pass
BEC (10/25/2015) Pass

[Windel]

Testing your knowledge-

To be effective, analytical procedures in the overall review stage of an audit engagement should be performed by which of the following?

A. The staff accountant who performed the substantive auditing procedures

B. The managing partner who has responsibility for all audit engagements at that practice office

C. A manager or partner who has a comprehensive knowledge of the client's business and industry

D. The CPA firm's quality control manager or partner who has responsibility for the firm's peer review program

What do you think the answer is?

[Anonymous]

@NoraU – Good find! I hope the wording of the question and AU-C 315 aren't conflicting because that seems like the correct answer.

@Kate – “The finance and investment cycle consists of planning for capital requirements and raising the required money by borrowing, selling stock, and entering into acquisitions and joint ventures. The finance part of the cycle involves obtaining money through stock or debt issues. The investment portion of the cycle encompasses using the funds for investments in property, plant, and equipment (covered in the acquisition and expenditure cycle chapter 8), marketable securities, joint ventures and partnerships, and subsidiaries. The transactions discussed in this chapter generally involve large dollar amounts and occur relatively infrequently. They can involve complex accounting issues and generally receive significant attention from management and the auditors.” – Via google.

@King – Seems like B or C could be correct, but I would go with C due to the wording “… has a comprehensive knowledge of the client's business and industry.” If choice B were to include the same wording, I'd probably go with B over C.

What was the explanation?

[cathypierce]

@King – did you ever get a response to your question on whether $500,000 or $750,000 is correct now. Would love to know the answer in case this pops up on the test.

[Anonymous]

The answer to King's question above is C. ARCPA2B's explanation is spot on.

[cathypierce]

Sorry. The question above that one is about the Federal Awards threshhold for a single audit.

[Anonymous]

I believe the $750,000 threshold became effective as part of the single audit act on January 1, 2015, I'm looking for supporting documentation now, I know I have a PDF at work but surely there is something on Google to clarify this..

Here is a mention of the effective date, still looking for a better source though… Frustrating…

https://www.ppcpas.com/insights/the-omb-raises-the-threshold-for-omb-a-133-compliance-audits

Another mention…

https://www.whitehouse.gov/blog/2014/12/18/transforming-landscape-federal-financial-assistance

More on the A-133 threshold change… At work I have “Federal Register Vol. 78 No. 248 Thursday, December 26, 2013 Part 3 – Office of Management and Budget” and it states, “Section 200.501 Audit Requirements raises the Single Audit threshold from $500,000 in Federal awards per year to $750,000 in Federal awards per year. This reduces the audit burden for approximately 5,000 non-Federal entities while maintaining Single Audit coverage over 99% of the Federal dollars currently covered.” Also, “§ 200.501 Audit requirements. (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this Part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single audit conducted in accordance with § 200.514 Scope of audit except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section.”

The below FAQ from the AICPA would make it seem this wouldn't be tested until July if the effective date is in fact 1/2015.

From the AICPA…

“What are the rules regarding new accounting and auditing pronouncements?

Accounting and auditing pronouncements are eligible to be tested on the Uniform CPA Examination in the testing window beginning six months after a pronouncement's effective date, unless early application is permitted. When early application is permitted, the new pronouncement is eligible to be tested in the window beginning six months after the issuance date. In this case, both the old and new pronouncements may be tested until the old pronouncement is superseded.

Changes in the federal taxation area, the Internal Revenue Code and federal taxation regulations may be included in the testing window beginning six months after the change's effective date or enactment date, whichever is later.

For all other subjects covered in the Regulation (REG) and Business Environment and Concepts (BEC) sections, materials eligible to be tested include federal laws in the window beginning six months after their effective date, and uniform acts in the window beginning one year after their adoption by a simple majority of the jurisdictions.”

https://www.aicpa.org/BecomeACPA/CPAExam/ForCandidates/FAQ/Pages/computer_faqs_2.aspx

I'm done for now, that's about all the wading in this topic I'm willing to do for now.

[tami3492]

https://www.whitehouse.gov/omb/financial_fin_single_audit

According to the OMB website, the dollar threshold is still $500,000. Maybe it is going up to $750,000 later this year and Becker has already updated?

FAR 7/8/14 - 88 - Becker live course
REG 10/14/14 - 82 - Becker live course, Ninja notes and audio
BEC 11/25/14 - 88 - Becker live course, Ninja audio, Wiley book for extra questions
AUD 2/3/15 - 94 - Becker self study, Ninja audio, Wiley book for extra questions

[Anonymous]

For the engagement letter: is it from auditor to Board of Directors or is it from auditor to management?

[Anonymous]

Pretty sure the engagement letter could be to both but definitely goes to management. Depends on the situation.

[Anonymous]

I thought Jeff touched on the issue of the dollar threshold for single audits somewhere. I'm pretty sure it went up to 750k but thought it wasn't being tested at that level yet. Jeff is the guru on this. Maybe he can provide some insight.

[Martin]

I posted the below question yesterday, I got an answer from becker and the answer is D. We do include AP as part of risk assessment, the answer from Ninja is incorrect.

When performing risk assessment procedures to obtain an understanding of internal controls, the auditor may include all of the following except:

A.

observing the application of specific controls.

B.

performing analytical procedures.

C.

inspecting documents and reports.

D.

tracing transactions through information system relevant to financial reporting.

According to Roger, the answer should be D,but ninja MC answer says that Analytical procedures are not use for risk assessment procedures, so as far as ninja mc is concrern the answer is B. Who is correct here?

Through God all things can happen!

“You never fail until you stop trying.”
― Albert Einstein
When I was young, I used to admire intelligent people;as I grow older, I admire kind people.
“Just keep swimming, just keep swimming.”

FAR= 72-84
Audit= 73-82
BEC= 74-75
Reg=77

[Anonymous]

@Martin – Scroll up to Kate's response to the previous mention of the question. That seems to answer the question pretty straight forward, unless there is a wording trick in there.

[Author]

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