[jeff]

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

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

[Forem004]

NINJA 1025:

An auditor is obligated to communicate a proposed audit adjustment to an entity's audit committee only if the adjustment:

A.
has not been recorded before the end of the auditor's fieldwork.

B.
has a significant effect on the entity's financial reporting process.

C.
is a recurring matter that was proposed to management the prior year.

D.
results from the correction of a prior period's departure from GAAP.

[Forem004]

4-9

In performing a search for unrecorded retirements of fixed assets, an auditor most likely would:

a. inspect the property ledger and the insurance and tax records and then tour the client's facilities
b. tour the client's facilities and then inspect the property ledger and the insurance and tax records
c. analyze the repair and maintenance account, and then tour the client's facilities
d. tour the client's facilities and then analyze the repair and maintenance account

I answered this one correctly, but I was second guessing myself the whole time.

[Forem004]

4-13

Which of the following would an auditor least likely consider with respect to fair values?

a. segregation of duties between those committing the entity to certain transactions and those resp for understanding the valuations related to those transactions

b. the effect on fair value measurement and disclosures of info available subsequent to the audit

c. the role of IT in determining fair value measurements and disclosures

d. whether the valuation methods used are appropriate in relation to the industry in which the entity operates

[Forem004]

4-17

According to PCAOB standards which one of the following statements does not reflect a qualitative standard that should be considered when evaluating the materiality of uncorrected misstatements?

a. the effects of misclassification, for example, between operation and non-operating

b. the significance of the misstatement relative to the needs of users

c. the cost of the correction

d. the dollar amount of the error

[Forem004]

NINJA 496:

When using classical variables sampling for estimation, an auditor normally evaluates the sampling results by calculating the possible error in either direction. This statistical concept is known as:

A. precision.

B. reliability.
C. projected error.

D. standard deviation.

I remember getting this wrong the first time around. I know this is just one that I have to memorize the definition but ???

[Forem004]

Both of your last two were correct. For Ninja 678, are they considering the contingency the estimate? I wanted to answer B, because if there is a substantial difference from last year for the same estimate, I'm going to have questions.

[thebigguy1992]

5. Which of the following procedures would an auditor most likely perform to identify unusual sales transactions?

Tracing credits in the accounts receivable ledger to source documentation.
Performing a trend analysis of quarterly sales.
Examining duplicate sales invoices for credit approval by the credit manager.
Tracing cash receipt entries to the bank statement deposit for amount and date.

Answer is B….why?

this is from released 2016 AICPA difficult By the way

[Forem004]

I'm looking that one up, but I try to use process of elimination if I am not familiar with a topic. You know it won't be A bc credits to AR would not result in sales transactions, not sure about B at first glance, C only tests a control – approval, and D tests that it was deposited appropriately.

I was not familiar with the exact definition of trend analysis, but it's “ratio analysis can be used to analyze trends over time.”

So this is the only answer that would allow you to identify an unusual transaction.

Does that help?

[Holly]

1025 B
4-9 A
4-13 A
4-17 D
496 A

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

[Forem004]

1025 B – correct!

4-9 A – correct!

4-13 A – B The auditor would consider subsequent events and transactions occurring before the completion of the audit, not after. The auditor is not resp for predicting the future and would not be expected to evaluate the effect of conditions arising subsequent to the audit, that, if known at the time of the audit, might have affected fair value measurements and disclosures.

4-17 D – correct!

496 A – correct!

[Holly]

496 – I just think of it as you know when a sample is taking it could represent the whole population, but you know it's not exact; so going a few more or less is probably more accurate (precise) than a single number.

678 – The question asked how to determine if all estimates were identified, not reasonable. The contingency would be an estimate until it is settled and paid.

Those are my thoughts anyway. I have never even looked at an audit report, much else been involved in one. I could be entirely wrong.

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

[Holly]

READ THE QUESTION UGH!!!!

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

[Holly]

5. Which of the following procedures would an auditor most likely perform to identify unusual sales transactions?

Tracing credits in the accounts receivable ledger to source documentation. – Credits wouldn't explain anything
Performing a trend analysis of quarterly sales. – Huge sales numbers or frequent sales during dead months
Examining duplicate sales invoices for credit approval by the credit manager. – control
Tracing cash receipt entries to the bank statement deposit for amount and date. – completeness/understated and sales aren't typically understated

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

[Forem004]

Thanks that helps HR!

[Forem004]

5-2

As a result of tests of controls, an auditor assessed control risk too low and decreased substantive testing. This assessment occurred because the true deviation rate in the population was:

a. less than the risk of assessing control risk too low, based on the auditor's sample

b. less than the derivation rate in the auditor's sample

c. more than the risk of assessing control risk too low, based on the auditor's sample

d. more than the deviation rate in the auditor's sample

[Author]

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