[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

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Pete]

The purpose of performance auditing is to determine if the desired results of a program are being achieved. The first step in conducting such an audit is to

A. Collect quantifiable data on the program’s success or failure.
B. Determine the time frame to be audited.
C. Identify the legislative intent of the program being audited.
D. Evaluate the system used to measure results.

[FAR_WARS]

C?

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

[Pete]

1- A CPA firm has decided to rely on the audit work performed by another audit firm. Which of the following procedures should the CPA firm perform when taking responsibility for the other firm’s audit work?

A. Reference the reliance on the other firm’s work in a footnote disclosure to the financial statements.
B. Review the other firm’s audit workpapers and reperform a subset of audit testing to validate the firm’s conclusions.
C. Reference the reliance on the other firm’s work in the first paragraph of the opinion in the audit report.
D. Obtain and attach a copy of the other firm’s representation letter and audit report to the opinion that the CPA firm issues.

2– In a financial statement audit, the audit report on compliance with requirements applicable to a governmental entity should address

Scope of Testing
Sufficiency and Appropriateness of Evidence

A.
Yes
Yes

B.
Yes
No
C.

No
Yes

D.
No
No

3-The auditor’s responsibilities under the Single Audit Act include
A. Reporting on compliance with grant requirements.
B. Submitting a data collection form.
C. Designating the cognizant agency.
D. Expressing an opinion on internal control.

4- A violation of the profession’s ethical standards would most likely have occurred when a CPA in public practice
A. Serves on a municipal board of income tax appeals, discloses that status to concerned parties, participates as a board member in a tax appeal involving a client, but does not receive the client’s consent for such action.
B. Used a records-retention agency to store the CPA’s working papers and client records.
C. Served as an expert witness in a damage suit and received compensation based on the amount awarded to the plaintiff.
D. Referred life insurance assignments to the CPA’s spouse, who is a life insurance agent.

5-
SSARSs may be applied to other historical or prospective financial information if they are
A. Considered along with appropriate auditing standards.
B. Approved by management.
C. Applied without modification.
D. Adapted as necessary in the circumstances.

[red_rose]

@peter…D evaluate the system? let us know, thanks

[Pete]

The purpose of performance auditing is to determine if the desired results of a program are being achieved. The first step in conducting such an audit is to

A. Collect quantifiable data on the program’s success or failure.
B. Determine the time frame to be audited.
C. Identify the legislative intent of the program being audited.
D. Evaluate the system used to measure results.

Answer (C) is correct.

Performance audits provide findings or conclusions based on an evaluation of sufficient appropriate evidence against stated criteria, such as specific requirements, measures, or defined business practices. Performance audit objectives vary widely. One example is assessing the extent to which legislative goals are being achieved. It attempts to measure the accomplishments and relative success of the undertaking. However, this measurement depends on the actual intent of the legislation that established the program.

[Pete]

Which of the following services would constitute a management function under Government Auditing Standards and result in the impairment of a CPA’s independence if performed by the CPA?

A. Providing methodologies, such as practice guides.
B. Providing accounting opinions to a legislative body.
C. Recommending internal control procedures.
D. Developing entity program policies.

[red_rose]

@ peter here are my answers:

1. C
2. A
3. A
4. D
5. Im thinking C or D, ill go with D since modifications i believe are allowed, if explained/reasonable…

Tough questions, but its making me think. Thanks Peter!!

[red_rose]

dang it, got it wrong! Makes sense though, if you're conducting a performance audit, you need to know the laws/legislation. ok thanks

other question D. developing program policies. Seems thats going further than recommending & would impair independence…?

[Pete]

1- b
nswer (B) is correct.
When the group engagement partner assumes responsibility for the work of a component auditor, the auditor’s report on the group statements does not refer to the component auditor. However, the group engagement partner still must be satisfied that those performing the engagement, including component auditors, collectively possess the necessary competence. Moreover, the assumption of responsibility requires involvement in the work of the component auditor. Involvement may include (1) performing risk assessment procedures, (2) performing further procedures, and (3) reviewing the component auditor’s documentation (AU 600).

2-
Answer (A) is correct.
Government Auditing Standards for financial statement audits states that the report should (1) describe the scope of the auditors’ testing of compliance with laws, regulations, contracts, or grant agreements that have a material effect on the statements; and (2) state whether tests provided sufficient appropriate evidence. This information may be included in a separate report. The report also should state whether the tests performed provided sufficient appropriate evidence to support the opinion on compliance.

3-

answer (A) is correct.
Under the Single Audit Act, audit reporting should include an opinion on the fairness of the financial statements, a report on internal control, and a report on compliance with grant requirements.

4-
Answer (A) is correct.
If the significant relationship creating a conflict of interest is disclosed to and consent is obtained from all appropriate parties, the Integrity and Objectivity Rule does not prohibit performance of the professional service. (But disclosure and consent do not eliminate an impairment of independence.) The failure to secure the client’s consent therefore means that the arrangement could be viewed as impairing the CPA’s objectivity.

5-
Answer (D) is correct.
SSARSs describe responsibilities of the accountant for engagements to (1) prepare, (2) compile, and (3) review financial statements. They are to be adapted as necessary in the circumstances for services on other historical or prospective financial information. But prospective financial information may be prepared or compiled but not reviewed

[Pete]

Which of the following services would constitute a management function under Government Auditing Standards and result in the impairment of a CPA’s independence if performed by the CPA?

A. Providing methodologies, such as practice guides.
B. Providing accounting opinions to a legislative body.
C. Recommending internal control procedures.
D. Developing entity program policies.

yes it's d i got it wrong 🙁

is developing make the auditor in management responsibilities, like implementation or maintaining?

[FAR_WARS]

D is correct
-Developing entity program policies is considered a management policy under “the yellow book”.

C is almost correct.
-Recommending internal control procedures is not a management policy, but being involved with the DIM of IC procedures would be.

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

[FAR_WARS]

I always struggle with these questions. Maybe someone here can explain/help me remember the answers better.

Field, CPA, is auditing the financial statements of Miller Mailorder, Inc., (MMI) for the year ended January 31, 20X1. Field has compiled a list of possible errors and fraud that may result in the misstatement of MMI's financial statements, and a corresponding list of internal controls that, if properly designed and implemented, could assist MMI in preventing or detecting the errors and fraud. Select the internal control that most likely could assist MMI in preventing or detecting the sending of an invoice for shipped goods and its recording in the sales journal without being posted to any customer account.

A. Shipping documents are compared with sales invoices when goods are shipped.
B. Control amounts posted to the accounts receivable ledger are compared with control totals of invoices.
C. Shipping clerks compare goods received from the warehouse with approved sales orders.
D. Daily sales summaries are compared with control totals of invoices.

Answer: B
Comparing the control amounts posted to the accounts receivable ledger with the control totals of invoices is the best procedure for preventing or detecting the generation of an invoice for shipped goods which is recorded in the sales journal, but is not posted to any customer account.

The control amount for the accounts receivable ledger would be less than the control total of invoices if the sale were not posted to the customer's account. This is an example of an independent check being used as a control.

Field, CPA, is auditing the financial statements of Miller Mailorder, Inc., (MMI) for the year ended January 31, 20X1. Field has compiled a list of possible errors and fraud that may result in the misstatement of MMI's financial statements, and a corresponding list of internal controls that, if properly designed and implemented, could assist MMI in preventing or detecting the errors and fraud. Select the internal control that most likely could assist MMI in preventing or detecting the sending of an invoice for shipped goods that is not recorded in the sales journal.

A. Shipping documents are compared with sales invoices when goods are shipped.
B. Approved sales orders are required for goods to be released from the warehouse.
C. Shipping clerks compare goods received from the warehouse with approved sales orders.
D. Daily sales summaries are compared with control totals of invoices.

Answer: D
Comparing daily sales summaries with control totals of invoices is the best procedure for ensuring that invoices for goods shipped are recorded in the sales journal. Such a comparison would detect differences between the total sales made and recorded. This is an example of an independent check being used as a control. A sale that has not been recorded will result in a sales summary that does not include certain sales invoices.

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

[Pandarama]

@far_wars – usually the auditor doesn't send the attorney letter. The client sends the letter to the attorney requesting the attorney to send a letter to the auditor. The auditor will usually get a copy of the letter that was sent to the attorney so they know that it was actually requested.

BEC - 80
AUD - 64, 75 - credit lost, 90!!
REG - 73, 74, 83
FAR - 61, 72, 85

Feels good finishing on my best note. Time to watch the mailbox.

[FAR_WARS]

Are you sure? Perhaps it could be different for different situations?

Communication With the Entity’s Legal Counsel
AU-C 501.18
“Unless the audit procedures required by paragraph .16 indicate that
no actual or potential litigation, claims, or assessments that may give rise to
a risk of material misstatement exist, the auditor should, in addition to the
procedures required by other AU-C sections, seek direct communication with
the entity's external legal counsel. The auditor should do so through a letter
of inquiry prepared by management and sent by the auditor requesting the
entity's external legal counsel to communicate directly with the auditor.”

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

[csvirk]

Guys Sorry about this off topic request. I have posted a question regarding job hunt/networking. I would really appreciate if i get input from this group. Thank you for your help.

here is the link

https://www.another71.com/cpa-exam-forum/topic/how-to-use-local-cpa-directory-for-job-hunt-and-networking

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

[Author]

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