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November 20, 2014 at 6:25 pm #190228
jeff
KeymasterFree Study Planner, Notes, Audio, Flashcards: https://www.another71.com/cpa-exam-study-plan/
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December 15, 2014 at 8:02 pm #649907
howmany74s
Member@anjanja, is this a section from a book? Doesn't look like a question, so I'll try to answer by thinking what you might read, please correct me if I'm wrong:
Most public and IFRS financials are presented in comparative years format (2 or 3 years). So if an emphasis of matter (drawing attention to an accounting fact disclosed in the f/s or notes) or other matter (drawing attention to an information relevant to users) paragraph is used in Year 2013's audit report, then most likely you will see the same paragraph in 2014's audit report – unless the fact doesn't exist anymore -.
In your question, you talk about a new accounting policy, so if the policy is implemented and old story for the entity, there won't be a need for either paragraphs. These paragraphs exist as long as auditor thinks the information might impact user's decision.
December 15, 2014 at 8:21 pm #649908Windel
ParticipantI’m confused by the way this question is phrased. Can someone please clarify why existence and F/A additions would most likely affect the NET of an Independent Auditor?
An internal auditor's work would most likely affect the nature, timing, and extent of an independent CPA's auditing procedures when the internal auditor's work relates to assertions about the:
A. existence of contingencies.
Incorrect B. valuation of intangible assets.
Correct C. existence of fixed asset additions.
D. valuation of related party transactions.
EXPLANATION: Of the responses listed, fixed assets represent a class of assets and transactions that would have the least degree of subjectivity involved in the evaluation of the audit evidence gathered in support of the assertions.
December 15, 2014 at 9:40 pm #649909willpassby2014
Member@King Coffee All the other options given except C involves assumptions/ while calculating the valuation . Existence of F.A is a simple straight forward check the auditor can do . To obtain audit evidence of existence of F.A the auditor would check from Accounting records to source documents . Procuring this Audit evidence is affected by nature timing and extend of audit procedures employed. Not sure if this answer is convincing but i was able to guess the correct answer
BEC Passed
FAR Passed
AUD Passed
REG PassedDecember 15, 2014 at 11:07 pm #649910Anonymous
Inactivehowmany74s,
This is not actually a question, this is from Roger's book. Unmodified opinion with emphasis of matter paragraph when there is a change in accounting principle. I just don't understand what does “accounting principle is applied in all periods presented” mean.
December 15, 2014 at 11:34 pm #649911nickolasadamczyk
MemberDecember 15, 2014 at 11:45 pm #649912howmany74s
Member@anjanja, ok let's say we're talking about a bank and entity issues 2 year-comparative financial statements. There's a new revenue recognition standard that was released out in May, 2014 which will be applicable in the coming years.
Bank will have to disclose this standard if their revenue recognition will change in 2015 due to this new standard.
We're in year 2014. Auditor's report will have an emphasis of matter paragraph pointing out to the disclosure where this standard is referred.
Year 2015 – Rev. rec. is fully implemented and there is a flux in the comparative financial statements' revenue balances.
2015 Auditor's report – emphasis of matter para. pointing out to the footnote related to the newly implemented standard and comparative f/s disclosure.
Year 2016 – Rev. rec has been going strong for the past two years, nothing new has happened after 2015 implementation. Only comparative periods that are presented are 2016 and 2015.
2016 Auditor's report – no emphasis of matter para. as we do not have a specific section related to the standard in our f/s and related disclosures.
Hope this helps.
December 16, 2014 at 1:19 am #649913nicholi80
MemberDecember 16, 2014 at 2:45 am #649914Anonymous
InactiveThanks howmany74s!
December 16, 2014 at 3:20 am #649915whurley33
ParticipantI'm using 2014 Wiley CPAexcel exam review study guide and am studying Module 7: audit sampling. I've noticed some subtle mistakes here and there. WTF, they couldn't do a proper proofreading? Anyway, I'm studying this control matrix and it's not making sense to me. Perhaps someone can enlighten me.
A.) If the test of controls sample indicates extent of operating effectiveness is adequate and the planned assessed level of control is adequate then this is the correct decision.
A.) However, if the test of controls sample indicates extent of operating effectiveness is adequate and the planned assessed level of control is inadequate then this is an incorrect decision (risk of assessing control risk too low).
B.) If the test of controls sample indicates extent of operating effectiveness is inadequate and the planned assessed level of control is adequate then this is an incorrect decision (risk of assessing control risk too high).
B.) However, if the test of controls sample indicates extent of operating effectiveness is inadequate and the planned assessed level of control is inadequate then this is the correct decision.
Does this make sense? These concepts are not entirely clear to me.
Thanks
December 16, 2014 at 2:17 pm #649916acctaks
Participant@King Coffee don't over think questions like these because you will get them. The external auditor can use the work of an internal auditor if it doesn't involve the use of the external auditor's professional judgement. A, B, and D require the external auditor's judgement. Fixed asset additions on the other hand are concrete numbers. The auditor can simply use the internal auditor's work and just look at contracts, receipts, and other information to verify that work. If you look at the other 3 you can see that those are pretty much speculation so the auditor would have to gather a lot of evidence and put in more work.
F-Pass
A-Pass
R-Pass
B-PassI'm a CPA!
December 16, 2014 at 2:35 pm #649917acctaks
Participant@whurley33 okay I assume you have the different components for sampling in that chapter. Let's say you take a sample and you're expecting x amount of deviations to appear in that sample. After you do your sampling BOOM the results match what you thought and you use it. Well, it's just not your day because the sample you pulled doesn't actually represent the entire population. That's just called incorrect acceptance which means it's ineffective.
Now, if you do the opposite of the above it's incorrect rejection which means you do more work than you needed to. That means it was inefficient.
I know my wording isn't spot on but why not put things into your own language so you can understand them? I don't talk or think like a book is written so it's important to just break things down and simplify them.
F-Pass
A-Pass
R-Pass
B-PassI'm a CPA!
December 16, 2014 at 2:53 pm #649918Windel
Participant@ willpassby2014
Your answer/perspective is convincing enough to pass the sniff test. Thanks
December 16, 2014 at 3:03 pm #649919Windel
Participant@ nickolasadamczyk
Here’s what a fellow Another71 tester shared with me back when I took REG. He had the highest scores I’ve ever seen (FAR 98, AUD 99, BEC 97, REG pending) and he’s not in any of the CPA chats anymore so I can only assumed that his methodical approach was highly effective.
“I have only really used Becker in preparing for exams. I chose to watch the live lectures online at my own time. When starting I take one day to watch the chapter lecture, then read the chapter the next day. I did that for every chapter until I was done. I then went through and did the multiple choice by chapter in order. By the time I did that, I normally had 85% correct per chapter and would go back through to do the ones I got wrong so I could have close to 100% correct. I then did simulations for the chapters in order. When I had extra time leading up to the test I would do some progress tests. I tried to do final exam 1 four days before my test and final exam 2 two days before my test.
Multiple choice was when things really started to click for me. That's why I chose not to use Becker's suggested approach of Ch 1 watch, mc, sim; Ch 2 watch, multiple choice, sim, etc. because I would have forgotten the earlier chapter multiple choice by the time I got all the way through.
Just what worked for me! Friends have taken different approaches and passed with good margins as well. I took a summer off of classes and work to study for aud, far, and reg so plenty of time to study and focus which I know a lot of candidates aren't able to do.”
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Good Luck Nicolas, I hope this or some variation of it works for you this time around
December 16, 2014 at 3:11 pm #649920Windel
ParticipantThanks for your explanation and that makes sense. I was a little confused because on a question prior to the one that I posted it stated that Internal Auditors can be used by the Independent Auditor for tests of internal controls and substantive tests…which confused me because I was under the impression that the IA’s could only test Internal Controls, gather support document to corroborate management’s assertions to the f/s and I/C but I’ll have to re-read chapters 1 & 3 again.
December 16, 2014 at 4:54 pm #649921acctaks
Participant@King Coffee YES! Internal auditors work can be used for testing internal controls and substantive tests as long as they don't involve the auditor's judgement. Usually the auditor has to use judgement where management has to. Accounting estimates are a good example. Management creates their estimates so the external auditor has to use judgement in assessing those estimates. I hope I'm not confusing you but testing controls doesn't involve auditor's judgement. The process of assessing controls and deciding the N,E,T does however. So, the auditor can't use the internal auditor for the process leading up to deciding what controls to test. So, back to the original question. The auditor can use the internal auditor to test the controls over the FA additions. This is because it is really just about approval which would be in the board minutes.
The general rule is if it's a low risk area and involves little judgement + the internal auditor is competent and has objectivity then use them and their work because it allows you to concentrate on the higher risk areas.
https://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-00322.pdf
May sound kind of overboard but I found that reading some of the actual standards helped clarify things for me. I really suggest reading them for independence too. They aren't really that bad. I came out with a 92 btw.
F-Pass
A-Pass
R-Pass
B-PassI'm a CPA!
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