[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 think the asnwer is d

[win2bet]

@peter, yup you are right the answer is D

But check out the explanation
“Legal counsel's response may be limited to matters that are considered individually or collectively material to the financial statements, provided the entity and auditor have reached an understanding on the meaning and limits of materiality for purposes of this letter and management has communicated such understanding to the legal counsel.”

Notice the last sentence says mgmt communicated such understanding to legal counsel, which really sounds like C could easily be the answer as well.

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

[Pete]

yeah I remember this question it's confusing

but I think one of the parties who should reach understanding are the auditor, right?

[Pete]

A CPA engaged to examine financial statements observes that the accounting for a certain material item is not in conformity with generally accepted accounting principles, and that this fact is prominently disclosed in a footnote to the financial statements. The CPA should

a-Express an unmodified opinion and insert an emphasis-of-matter paragraph referring to the footnote.
b-Disclaim an opinion.
c-Not allow the accounting treatment for this item to affect the type of opinion because the deviation from generally accepted accounting principles was disclosed.
d-Qualify the opinion because of the deviation from generally accepted accounting principles.

[SaveBandit]

@Peter

D?

Studying for AUD is so much more terrible than I thought it would be. There is no way I can memorize all this random information.

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[Pete]

The profession’s ethical standards would most likely be considered to have been violated when a CPA

a-Continued an audit engagement after the commencement of litigation against the CPA alleging excessive fees filed in a stockholder’s derivative action.

b-Represented to a potential client that the CPA’s fees were substantially lower than the fees charged by other CPAs for comparable services.

c-Issued a report on a financial forecast that omitted a caution regarding achievability.

d-Accepted a consulting engagement concerning data processing services for which the CPA lacked independence.

[Pete]

@SaveBandit yes right it's D

[Pete]

that's good one

Inclusion of inaccurate interim information required by the FASB will result in which of the following types of reports?

a-Standard unmodified.

b-Unmodified with an emphasis-of-matter paragraph.

c-Qualified with a basis for modification paragraph.

d-Adverse.

[Pete]

A CPA’s report performing an examination of an entity’s internal control identified several material weaknesses and will be published in the entity’s annual report to shareholders. Management intends to include a statement asserting that the cost of correcting the weaknesses would exceed the benefits of reducing the risk of errors and fraud. The CPA should

a-Insist that management’s statement not appear in the same document as the CPA’s report.

b-Investigate whether the cost of correcting the weaknesses would, in fact, exceed the benefits.

c-Insist that management correct the weaknesses if cost is the only consideration.

d-Not express any opinion as to management’s statement.

why the answer is d ?

[payaza2000]

C? to Inclusion of inaccurate interim information required by the FASB will result in which of the following types of reports?
A CPA engaged to examine financial statements observes that the accounting for a certain material item is not in conformity with generally accepted accounting principles, and that this fact is prominently disclosed in a footnote to the financial statements. The CPA should

a-Express an unmodified opinion and insert an emphasis-of-matter paragraph referring to the footnote.
b-Disclaim an opinion.
c-Not allow the accounting treatment for this item to affect the type of opinion because the deviation from generally accepted accounting principles was disclosed.
d-Qualify the opinion because of the deviation from generally accepted accounting principles.

I thought this answer was A, because of how earlier in the Becker course they said that an item does not necessarily have to be in conformity with GAAP or the Financial Reporting Framework if presenting the information in conformity with the framework, if departing from the framework would cause to be more fairly presented.

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

[payaza2000]

A CPA’s report performing an examination of an entity’s internal control identified several material weaknesses and will be published in the entity’s annual report to shareholders. Management intends to include a statement asserting that the cost of correcting the weaknesses would exceed the benefits of reducing the risk of errors and fraud.

Because cost benefit analysis is a justified reason for not correcting a material weakness in Internal Control.

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

[Pete]

@ payaza2000

Inclusion of inaccurate interim information required by the FASB will result in which of the following types of reports?

a-Standard unmodified.

b-Unmodified with an emphasis-of-matter paragraph.

c-Qualified with a basis for modification paragraph.

d-Adverse

the answer is B

Certain SEC reporting companies are required to include unaudited quarterly information in their annual reports or other documents filed with the SEC that contain audited financial statements. Auditors are engaged to perform review procedures either at the conclusion of each quarter, or at the end of the year when the information is included with the annual information. When dealing with the annual financial statements, omission, misstatement, or auditor inability to review the quarterly information all lead to inclusion of an emphasis-of-matter paragraph in the annual audit report. Be aware that the information is to be reviewed, not audited. Therefore, its misstatement will not lead to a qualified or an adverse opinion.

[Pete]

A CPA engaged to examine financial statements observes that the accounting for a certain material item is not in conformity with generally accepted accounting principles, and that this fact is prominently disclosed in a footnote to the financial statements. The CPA should

a-Express an unmodified opinion and insert an emphasis-of-matter paragraph referring to the footnote.
b-Disclaim an opinion.
c-Not allow the accounting treatment for this item to affect the type of opinion because the deviation from generally accepted accounting principles was disclosed.
d-Qualify the opinion because of the deviation from generally accepted accounting principles.

The answer is D correct because when financial statements are materially affected by a departure from generally accepted accounting principles an auditor should issue either a qualified or an adverse opinion.

Materially misstated financial statements due to departures from GAAP result in either a qualified opinion or an adverse opinion; both types of reports include a basis for modification paragraph preceding the opinion paragraph. Examples of departures from GAAP include the use of an unacceptable inventory valuation method (e.g., current sales value) or incorrectly treating a capital lease as an operating lease. The type of report depends on the pervasiveness of the misstatements. If the misstatements are considered to have a material and pervasive effect an adverse opinion is appropriate.

[Pete]

@ payaza2000

A CPA’s report performing an examination of an entity’s internal control identified several material weaknesses and will be published in the entity’s annual report to shareholders. Management intends to include a statement asserting that the cost of correcting the weaknesses would exceed the benefits of reducing the risk of errors and fraud. The CPA should

a-Insist that management’s statement not appear in the same document as the CPA’s report.

b-Investigate whether the cost of correcting the weaknesses would, in fact, exceed the benefits.

c-Insist that management correct the weaknesses if cost is the only consideration.

d-Not express any opinion as to management’s statement

the answer to that question a little bit weird

because the accountant should not express any opinion as to management’s statement. Additionally, the accountant is not precluded from disclaiming an opinion on any such statement.

so either to express a disclaimer or not expressing an opinion?

i don't get at all

[payaza2000]

Does anyone have any tips for the research questions specifically how to identify the words or phrases of the question that will put the answer to the research question in the top 1-4. Although I am really getting familiar with the authoritative literature, I find that it is an inefficient use of time to go and dig into the literature for the specific answer to the research question.

For example if the question is asking regarding the inquires that the Independent Auditor should make of the Internal Auditor regarding the risk of Fraud.

I'll first go digging in AU-C 610 and than AU-C 240. Any suggestions?

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

[Author]

Replies