[jeff]

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

[Forem004]

NINJA 538:

In auditing payroll, an auditor most likely would:

A. verify that checks representing unclaimed wages are mailed.

B. trace individual employee deductions to entity journal entries.

C. observe entity employees during a payroll distribution.

D. compare payroll costs with entity standards or budgets.

[Holly]

NINJA 538: D. compare payroll costs with entity standards or budgets.

forem004 when do you take the test? I bet you are so ready to get this past you being that you've passed all of the others.

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

[Forem004]

You are correct on the question and correct about me! I take it the day after you.

[Forem004]

Get ready…I missed quite a few on Chapter 3 also 🙁

3-8

On the basis of audit evidence gathered and evaluated, an auditor decides to increase the assessed risk of material misstatement from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would:

a. decrease substantive testing
b. decrease detection risk
c. increase inherent risk
d. increase materiality levels

[Forem004]

NINJA 1083:

Which of the following circumstances would ordinarily preclude a CPA from issuing a review or a compilation report on the financial statements of a nonissuer client that had originally engaged the CPA to perform an audit?

The CPA has been prohibited by the client from corresponding with the entity's legal counsel.
The entity refuses to provide the CPA with a signed representation letter.
A. I only

B. II only

C. Both I and II

D. Neither I nor II

I hate when I don't fully read the question!

[Forem004]

3-9

Which of the follow statements best describes an auditor's res to detect errors and fraud?

a. an auditor should design an audit to provide reasonable assurance of detecting errors and fraud that are material to the financials

b. an auditor is resp to detect material errors, but has not resp to detect fraud that is concealed through employee collusion or mgmt override of internal control

c. an auditor has no resp to detect errors and fraud unless analytics or tests of transactions identify conditions causing a reasonably prudent auditor to suspect that the financials are materially misstated

d. an auditor has no resp to detect errors and fraud because an auditor is not an insurer and an audit does not constitute a guarantee

[Forem004]

3-11

In planning an audit, the auditor's knowledge about the design of relevant internal controls should be used to:

a. Identify the types of potential misstatements that could occur

b. assess the operational efficiency of internal control

c. determine whether controls have been circumvented by collusion

d. document the assessed level of control risk

When I get these questions wrong, it makes me so angry! If I would just pay attention, I know this!

[Forem004]

3-14

An auditor should obtain sufficient knowledge of an entity's information system relevant to financial reporting to understand the:

a. safeguards used to limit access to computer facilities

b. process used to prepare significant accounting estimates

c. procedures used to assure proper authorization of transactions

d. policiies used to detect the concealment of fraud

[Forem004]

3-17

After performing risk assessment procedures, an auditor decided not to perform tests of controls. The auditor most likely decided that:

a. the available evidence obtained through tests of controls would not support an increased level of control risk

b. a reduction in the assessed level of control risk is justified for certain financial assertions

c. it would be inefficient to perform test of controls that would result in a reduction in planned substantive tests

d. the assessed level of inherent risk exceeded the assessed level of control risk

I have a problem with the way this one is worded….

[Forem004]

NINJA 520:

As a result of tests of controls, an auditor assesses control risk too high. This incorrect assessment most likely occurred because:

A. control risk based on the auditor's sample is less than the true operating effectiveness of the client's control activity.

B. the auditor believes that the control activity relates to the client's assertions when, in fact, it does not.

C. the auditor believes that the control activity will reduce the extent of substantive testing when, in fact, it will not.

D. control risk based on the auditor's sample is greater than the true operating effectiveness of the client's control activity.

Why can I not get this concept straight in my mind???

[Holly]

3-8b. decrease detection risk
NINJA 1083:C. Both I and II
3-9a. an auditor should design an audit to provide reasonable assurance of detecting errors and fraud that are material to the financials. This one was tricky to me.
3-11a. Identify the types of potential misstatements that could occur
3-14b. process used to prepare significant accounting estimates
3-17c. it would be inefficient to perform test of controls that would result in a reduction in planned substantive tests. I hate this question.

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

[Forem004]

3-8: correct!

1083: nice to see you fully read your questions! 🙂

3-9: me too, but it should not have been. I just twist some of the wording on these questions.

3-11: correct!

3-14: correct!

3-17: correct! It sounds like the the TOC would reduce substantive procedures, but if the auditor decides not to test controls, it's because they're ineffective so substantive procedures would be increased. I keep reading it repeatedly thinking something will make sense, but it just seems like it's worded backwards.

[Forem004]

NINJA 489:

When an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor will most likely increase the:

A.
level of detection risk.

B.
extent of tests of controls.

C.
level of inherent risk.

D.
extent of tests of details.

I guess I keep getting these wrong, bc we don't document the specific terms in an audit. I just do the procedures necessary when things aren't going as planned.

[Forem004]

NINJA 678:

Which of the following procedures most likely would assist an auditor in determining whether management has identified all accounting estimates that could be material to the financial statements?

A.
Inquire about the existence of related party transactions.

B.
Determine whether accounting estimates deviate from historical patterns.

C.
Confirm inventories at locations outside the entity.

D.
Review the lawyer's letter for information about litigation.

I'm a little confused about this one. We'll talk when you read it.

[Holly]

NINJA 489:D.
extent of tests of details. Which is exactly why this test didn't go as planned – practice is so different than academic.

NINJA 678:D.
Review the lawyer’s letter for information about litigation.

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

[Author]

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