AUD Study Group Q1 2015 - Page 71

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  • February 22, 2015 at 2:19 pm #650847
    jackaroe
    Participant

    @swilkinson

    Thanks. Look at it by focusing on the timing of an event. Let's say event X occurs (which increases IR), then can audit risk spontaneously arise before considering the affects on IR? Doesn't the event NOT cause AR to go up; rather it's the IR that causes the AR to go up?

    February 22, 2015 at 2:37 pm #650848
    swilk
    Member

    Yes, I suppose an event could cause IR to increase…

    I did a bit of digging and realize I may have been slightly misleading in my previous statement. I found a nice summary of the risk equation on another audit forum forum on the site:

    Audit Risk (AR) is something that the auditor decides on, but once it is set it never changes.

    In terms of Inherent Risk (IR), Control Risk (CR) and Detection Risk (DR). IR and CR are independent, so one does not affect the other. However, DR is dependent on IR and CR, so if either IR or CR increase, then DR has to decrease so that AR stays constant. If DR decreases, then you have to do more substantive testing.

    I found it helpful, and I hope you do to!

    AUD - 90 (2.26.2015)
    BEC - 76 (5.4.2015)
    REG - 79 (8.31.2015)
    FAR - 76 (2.22.2016)

    Roger and Ninja MCQ FTW.

    February 22, 2015 at 3:35 pm #650849
    jackaroe
    Participant

    @swilkinson

    Thanks again. I get the effects of each component of AR. The question still remains. Event happens. Question doesn't specify whether or not audit risk has already been predetermined. While I have seen the thread you are referring to, I have yet to see it in a text book, exam guide – but i it's worked for others here.

    February 22, 2015 at 4:14 pm #650850
    willpassby2014
    Member

    Does any one know where to find sample Audit reports and review reports in AL.

    BEC Passed
    FAR Passed
    AUD Passed
    REG Passed

    February 22, 2015 at 4:46 pm #650851
    swilk
    Member

    @jackaroe,

    Sorry I couldn't be of more assistance.

    I think it is important to understand that if an event occurred that caused an increase to IR, then DR would not remain constant. By it's very nature, DR would then be reduced (by the auditor), in order to coincide with the increased inherent risk.

    AUD - 90 (2.26.2015)
    BEC - 76 (5.4.2015)
    REG - 79 (8.31.2015)
    FAR - 76 (2.22.2016)

    Roger and Ninja MCQ FTW.

    February 22, 2015 at 7:52 pm #650852
    jackaroe
    Participant

    @willpassby2014 – AU-C700 A58

    @swilkinson – no worries. risk assessment is a process which is highly subjective area. exam is little over 25 hours away. time to brush up on types of reports and try to refresh my brain that is carrying over five decades worth of stuff…

    February 22, 2015 at 9:31 pm #650853
    willpassby2014
    Member

    Thanks buddy

    BEC Passed
    FAR Passed
    AUD Passed
    REG Passed

    February 22, 2015 at 9:48 pm #650854
    swilk
    Member

    @jackaroe best of luck! Hope you crush it!

    AUD - 90 (2.26.2015)
    BEC - 76 (5.4.2015)
    REG - 79 (8.31.2015)
    FAR - 76 (2.22.2016)

    Roger and Ninja MCQ FTW.

    February 22, 2015 at 11:18 pm #650855
    Martin
    Participant

    If you were asked in a simulation to pick examples of material weaknesses and material deficiencies, which examples would you use? I know the definition for both but I wouldn't be able to find examples on a simulation,I have not seen any.

    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

    February 23, 2015 at 12:26 am #650856
    willpassby2014
    Member

    LIST OF procedures to be performed prior to the beginning of fieldwork:

    review correspondence and permanent files,

    review prior years' audit workpapers, financial statements, and auditor's reports,

    discuss with CPA firm what personnel are responsible for audit and non-audit services to the client and matters that may affect the examination, and

    discuss with management any current business developments affecting the client.

    Consider the effects of applicable accounting and auditing pronouncements, particularly recent ones

    Obtain an understanding of the entity and its environment

    Update the prior year's written audit prOGRAM

    BEC Passed
    FAR Passed
    AUD Passed
    REG Passed

    February 23, 2015 at 1:52 am #650857
    Anonymous
    Inactive

    @Barce – lack of segregation of duties, ineffective processes, lack of integrity/ethics in management, lack of controls over reporting.

    February 23, 2015 at 2:19 am #650858
    Martin
    Participant

    Are those material weaknesses or material deficiencies>? How do you distinguish one from the other on a simulation?

    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

    February 23, 2015 at 2:25 am #650859
    Anonymous
    Inactive

    @Barce – Isn't a material deficiency a material weakness? I thought the classifications were control deficiency, significant deficiency and material weakness.

    February 23, 2015 at 2:46 am #650860
    Anonymous
    Inactive

    I've always been a little confused on the sending of inquiry letters. I know that due to the attorney-client privilege the client must authorize the attorney to address the auditors inquiry but…

    1) Does the auditor compose the inquiry letter, have management sign the letter and then the auditor send the letter?

    2) Does the client send a letter allowing the attorney to respond and then the auditor communicate separately?

    Also, with respect to the confirmation letter, such as a bank confirmation…

    3) Is the confirmation composed by the auditor and signed by management (authorized signer) and then sent by the auditor?

    4) Doesn't the auditor need to be in control of the sending of the confirmation to ensure legitimacy of the procedure?

    5) Is this the same for attorney inquiries?

    If anyone could clarify these concerns I would be greatly appreciative, for some reason I can not convince myself on these things.

    February 23, 2015 at 4:13 am #650861
    Martin
    Participant

    1)The auditor sends the letter signed by the client. Also, the auditor and management has to agree on what is material.

    2) I think the same applies for AR confirmation,but Im not sure. If the exam were today, I would go with what I just old you.

    A material weakness means that there is a reasonable possibility that a material misstatement could occur and that such misstatement will not be detected or corrected. Some examples would include?

    A significant deficiency are weakness in IC that are not material, but merit attentions. Some examples are?

    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

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