[jeff]

Welcome to the Q1 2016 CPA Exam Study Group for AUD.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

[Pete]

that's tricky one 🙂

An auditor may be able to reduce audit risk to an acceptably low level for some relevant assertions by
A. Increasing the level of detection risk.
B. Adhering to a system of quality control.
C. Preparing auditor working papers.
D. Performing analytical procedures.

[FAR_WARS]

@Peter:
D. Performing analytical procedures?

FAR- 80
BEC- 75
AUD- 78
REG- ?

[Pete]

yes right Far_war

Answer (D) is correct.
For some relevant assertions, analytical procedures alone may suffice to reduce audit risk to an acceptably low level. For example, the auditor’s risk assessment may be supported by audit evidence from tests of controls. Substantive analytical procedures generally are more applicable to large transaction volumes that are predictable over time (AU-C 330). The decision is based on the auditor’s professional judgment about the expected effectiveness and efficiency of the available procedures.

[KJ]

D

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[KJ]

Which of the following steps should be performed first in
applying analytical procedures?

a. Determine whether the difference between the
expectation and the recorded amount is reasonable.
b. Investigate and evaluate significant differences from the
expectation.
c. Develop an expectation of a balance or ratio by using
relationships that are expected to exist.
d. Compare the client’s recorded balance or ratio with the expectation.

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[Pete]

C

[KJ]

Yes, Answer (c) is correct because auditors first develop
an expectation of a balance or ratio before performing
the investigation.

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[Pete]

Tell, CPA, is auditing the financial statements of Youth Services Co. (YSC), a not-for-profit organization, in accordance with GAGAS as promulgated in Government Auditing Standards. Tell’s report on YSC’s compliance with laws and regulations is required to contain statements of

Positive Assurance Negative Assurance

A. Yes No

B. Yes Yes

C. No Yes

D. No No

[Pete]

To obtain an understanding of a continuing client in planning an audit, an auditor most likely would

A. Read specialized industry journals.
B. Read internal audit reports.
C. Reevaluate the risks of material misstatement.
D. Perform tests of details of transactions and balances.

[FAR_WARS]

B. Yes Yes
B. Read internal audit reports.

FAR- 80
BEC- 75
AUD- 78
REG- ?

[red_rose]

@peter, I agree with @FAR WARS on B. Read internal audit reports. I haven't got to the gov't accting section yet for the other question. I got B by process of elimination. D. you wouldn't perform tests of dtls/transactions in planning, A. reading journals may help, but its not enough for a particular company's I/C, C. imo is the “throw out” question. Let us know!

Thanks,

[csvirk]

An auditor's analytical procedures indicate a lower than expected return on an equity method investment. This situation most likely could have been caused by:

A.
an error in recording amortization of the excess of the investor's cost over the investment's underlying book value.

B.
the investee's decision to reduce cash dividends declared per share of its common stock.

C.
an error in recording the unrealized gain from an increase in the fair value of available-for-sale securities in the income account for trading securities.

D.
a substantial fluctuation in the price of the investee's common stock on a national stock exchange.

Why is it A? Isnt it should be D. because prices of stock some what related entity's profit?

FAR: 71, 77!
AUD: 69, 80
BEC: 72
REG: 84

[FAR_WARS]

You have to remember your equity method JE's from FAR. Basically our investment is overvalued on our books.

We correct that like this:
Amortization Expense
—————————-Investment

Now when Income is declared at year end, we will get less of it.

FAR- 80
BEC- 75
AUD- 78
REG- ?

[payaza2000]

@csvirk

I think you are mixing up accounting for available for sale securities with the equity method. Under the Equity method you recognize the investees % share of income, and decrease the amount in the investment by multiplying that same % by your dividend the investee declares. If you are receiving less from the equity method than you are expecting as in this case, it is because you are incorrectly amortizing the Unrealized Gain (BV/FV) over Cost; this would also be wrong if you were accounting for Available for sale securities, in which case the Unrealized GAins/ Lossess are recorded in Other Comprehensive Income. Its been awhile since Financial Accounting both the test, and class so Id double check on that.

FAR 5/6/2015- 84
REG 8/3/2015 - 87
AUD 10/25/2015- 69 1/20/2016 -75
BEC 2/26/2016- 80

Thank you God

[nmatera15]

An auditor used test data to verify the existence of controls in a certain computer program. Even though the program performed well on the test, the auditor may still have a concern that:

the answer “is the program tested is the same one used in regular production runs”

Could someone elaborate on this question please?

If the data is tested through the computer program why does it matter if it is the production version?

REG-68,70,80 (PASSED!)
BEC-60,67
FAR-TBD
AUD-62,1/5

[Author]

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