[jeff]

Welcome to the Q1 2017 CPA Exam Study Group for AUD. 🙂

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

[Forem004]

@HR 2-1 is correct!

Also, in my comment the other day about typing the questions I got wrong…this also helps me to study which is what this forum is for, correct?

[Forem004]

2-12

Lawrence reviewed the interim financials of James Co, an issuer and a manufacturer of restaurant equipment. For each of the following procedures that Lawrence might perform during the review, identify whether it is:

P – permitted but not required
R – required
N – not permitted

5. Compares of disaggregated revenue data for the current period with that of prior periods.
7. Add a paragraph to the review report to discuss scope limitations encountered during the review.
8. Add a paragraph to the review report to disclose a lack of consistency.

[Forem004]

2- 15

A CPA is required to comply with the provisions of SSAE when engage to:

a. report on financials that the CPA generated through the use of computer software
b. review MD&A prepared pursuant to rules and regs adopted by the SEC
c. provide the client with a financial format that does not include dollar amounts
d. audit financials that the client prepared for use in another country

[Holly]

b. express no assurance of any kind on the financials

It helps me study too 😉

5 R
7 n
8 P

b. review MD&A prepared pursuant to rules and regs adopted by the SEC

BEC - 79
REG - 85
AUD - 5/27/16

[Holly]

Incomplete

This is your 2-3 question. This one was a little harder for me to answer. I'm hoping it was because the entire paragraph wasn't given. I think it should explicitly state the basis, then describe that it's different.

BEC - 79
REG - 85
AUD - 5/27/16

[Forem004]

2-10: D: Failure to properly capitalize leases that the accountant considers material to the financials is a departure from GAAP. If mgmt will not capitalize the leases, the accountant should modify the standard review report or withdraw from the engagement. If modification to the report is sufficient to disclose the departure from GAAP, then the accountant may modify the review report.

2:15: all correct!

2-3: You are completely correct. I definitely should not have answered this one incorrectly bc I actually wrapped up an audit Friday that reports on the cash basis. 🙁

[Forem004]

2-17

Accepting an engagement to examine an entity's financial projection most likely would be appropriate if a projection were to be distributed to:

a. all employees who work for the entity
b. potential stockholders who request a prospectus or a registration stmt
c. a bank with which the entity is negotiating for a loan
d. all stockholders of record as of the report date

I'm embarrassed to say how many times I have answered this incorrectly!

[Forem004]

NINJA 260:

A client maintains a large data center where access is limited to authorized employees. How may an auditor best determine the effectiveness of this control activity?

A.
Inspect the policy manual establishing this control activity

B.
Ask the chief technology officer about known problems

C.
Observe whether the data center is monitored

D.
Obtain a list of current data center employees

[Forem004]

2-18

When a CPA examines a client's projected financials, the CPA's report should:

a. explain the principal differences between historical and projected financials
b. state that the CPA performed procedures to evaluate managements assumptions
c. refer to the CPA's auditor's report on the historical financials
d. include the CPA's opinion on the client's ability to continue as a going concern

[Holly]

2-17 c. a bank with which the entity is negotiating for a loan

BEC - 79
REG - 85
AUD - 5/27/16

[Holly]

2-18 b. state that the CPA performed procedures to evaluate managements assumptions

BEC - 79
REG - 85
AUD - 5/27/16

[Forem004]

NINJA 1089

A compilation report is always required when financial statements prepared by the accountant are expected to be used by which of the following?

A. Management only

B. Third parties only

C. Management and third parties

D. A compilation report is only required whenever the accountant is engaged to subject the financial statements to compilation procedures.

[Forem004]

2-17: correct!

2-18: also correct!

[Holly]

NINJA 1089 D. A compilation report is only required whenever the accountant is engaged to subject the financial statements to compilation procedures.

I think this one is right, but it threw me off a bit when I came across it because there was another question about compilations that was similar. I don't know the specific number, but it was NINJA. Something along the lines of having put together a financial statement that wasn't intended for use outside of management, but the gave it to the bank. Once the auditor finds out, what is the best course of action? The correct answer was to issue a compilation report.

BEC - 79
REG - 85
AUD - 5/27/16

[Forem004]

You are correct and I know which other questions you're referring to about the financials to the bank. I believe that is because it should have been subject to compilation procedures since it was given to a third party, therefore the same line of reasoning in 1089.

THat's what is so hard about this portion! Questions and topics are so similar, so it's easy to get confused! Also, there is so much judgement in audits, so it's hard to pick a “right” answer.

[Author]

Replies