[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]

I am sorry guys i am late 🙁

for first question ( i don't have any clue why is not B !!! I answered the same as you did @FAR-WAR
Answer (D) is correct.
An additional GAGAS requirement for reporting on financial audits states, in part, that the report should either (1) describe the scope of the auditors’ testing of internal control over financial reporting and of compliance with laws and regulations and present the results of those tests or (2) refer to a separate report containing that information. No statement of assurance is required. However, the auditor should report whether tests provide sufficient appropriate evidence to support an opinion on internal control and on compliance, etc.

The second question yes is right B

[SaveBandit]

In an audit of Pablo's financial statements in accordance with generally accepted auditing standards, the auditor is required to do all of the following except:

A. Document his or her understanding of Pablo's internal control.

B. Understand the design of Pablo's relevant controls.

C. Determine whether Pablo's internal controls have been implemented.

D. Evaluate the operating effectiveness of Pablo's internal controls.

Answer D. An auditor is not required to evaluate the operating effectiveness of internal controls unless the auditor is planning to rely on those controls.

I thought in an audit of a public company, (integrated audit) you had to opine on the effectiveness of internal control. So how can you opine on internal controls if you're not required to evaluate them? That doesn't make sense. The answer just talks about internal controls in general. It doesn't say anything about whether or not we are relying on those controls. Why is it that I can assume we aren't relying on the internal controls within the context of this question?

I feel like once I think I understand internal controls I'll read a question and the answer conflicts with something else I've read. Becker really does a crappy job of explaining internal controls as they relate to various engagements.

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[FAR_WARS]

@nmatera15

We want to make sure that the program that the client uses for production is the SAME program that we have tested.

If the client uses a different program for production than we have tested, our test becomes useless.

The wording on this question is funny. Perhaps if the answer read: “the program tested is NOT the same one used in regular production runs”, it would make more sense.

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

[FAR_WARS]

@SaveBandit:

The rule of thumb is to assume an audit of a nonissuer (SAS AU-C) unless the question specifically states the audit of of an issuer (PCAOB AS).
An audit of an issuer would require an evaluation of effectiveness of IC whereas an audit of a nonissuer would not.

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

[FAR_WARS]

@peter:

I still think the answer is Yes, Yes. (as you previously posted). What study materials are you using?

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

[Pete]

it's gleim Test bank mcqs

[SaveBandit]

@FARWARS

The question stem specifically stated that Pablo was a public company… (Becker – Practice test 1 – SIM 2)

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[SaveBandit]

Does anyone know what management's responsibilities are for an audit of internal control? Are they not required to make an assertion? I thought they were supposed to evaluate deficiencies. Also I thought the auditor could report either on management's assertion or directly on internal control for either an issuer or a nonissuer.

Ninja SIM:

During audits of internal controls over financial reporting of various issuers, the auditors encountered the independent situations below. For each situation, click on the associated shaded cell and select from the list the appropriate audit response. A response may be selected once, more than once, or not at all.

Question:
Management has not provided assurance that there are no material weaknesses in controls. Subsequent tests revealed no material weaknesses.

Solution: Express an unmodified opinion on the internal controls.

Explanation: The auditor is required to express an opinion directly on the company's internal control over financial reporting rather than opining on management’s assessment. Thus, even though management did not provide assurance that there were no material weaknesses in controls, the problem stated that tests revealed no material weaknesses.”

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[FAR_WARS]

@SaveBandit:

In that case, the only thing I can think of is “the Dodd Frank act” which says that an audit of Internal Control is required for accelerated or large accelerated filers only. Perhaps Pablo is not an accelerated or large accelerated Filer? Is this from the 2015 version of Becker?

I even looked at some PCAOB integrated example reports, and “effectiveness of IC” is defiantly in there. Regardless, by using process of elimination on this question, I likely would have guessed D because D is the most intensive option- therefore the least likely to be required.

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

[FAR_WARS]

From an example PCAOB combined report:

“management is responsible for these financial statements, for maintaining effective internal control over financial reporting , and for its assertion of the
effectiveness of internal control over financial reporting”

Looks like an assertion about the effectiveness of IC is required. Not sure about your next question.

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

[monikernc]

because it is Christmas Eve and you guys are on the Nice list: the relevant standard for issuers and opinions on internal control is PCAOB AS 05. i suggest pulling that up while doing that sim and understanding the difference between an integrated report and a separate opinion on internal control. https://pcaobus.org/Standards/Auditing/Pages/Auditing_Standard_5.aspx

then have a little spiked egg nog and call it a night!

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[payaza2000]

Just so I am not confused, and to make sure I got this right.

In an Audit of a NonIssuer you are not reporting on the effectiveness of Internal Control, just that it exist?

Whereas as PCAOB AS 05 that monikernc cited it specifically says for Public Companies you must report over the effectiveness of Internal Control?

” The auditor's objective in an audit of internal control over financial reporting is to express an opinion on the effectiveness of the company's internal control over financial reporting. Because a company's internal control cannot be considered effective if one or more material weaknesses exist, to form a basis for expressing an opinion, the auditor must plan and perform the audit to obtain appropriate evidence that is sufficient to obtain reasonable assurance 5/ about whether material weaknesses exist as of the date specified in management's assessment. A material weakness in internal control over financial reporting may exist even when financial statements are not materially misstated.”

I am so confused I need that spiked eggnog

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

[monikernc]

Savebandits sim specified audit of issuer – hence PCAOB5 applies. Internal control must be reported on in an audit of financial statements of issuers this is an integrated audit.
For nonissuers an examination of internal control integrated with an audit of financial stmts is an attestation engagement under AT501. For nonissuers the examination of internal control is only required under certain circumstances and an opinion on internal control is expressed. The audit of the financial stmts is no different but the report language changes when internal control has to be reported on – in this situation both auditing and attestation standards are applied.
An audit of nonissuer includes internal controls as part of the process but no opinion is expressed. This work is done under auditing standards.

Egg nog! Glug! Glug!

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Pete]

I am not studying The IT Control, is that bad thing ?

[win2bet]

I got a good one, & beyond frustrating, esp the reasoning of the answer =]…

A lawyer's response to an auditor's inquiry concerning litigation, claims, and assessments may be limited to matters that are considered individually or collectively material to the client's financial statements. Which parties should reach an understanding on the limits of materiality for this purpose?

A. The board and the client's management

B. The client's audit committee and the lawyer

C. The client's management and the lawyer

D. The lawyer and the auditor

REG 68,87
BEC 85
FAR 75
AUD 64,64, 86!

[Author]

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