[jeff]

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

[jeff]

The NINJA SIM list is listed when you log into NINJA MCQ.

I certainly welcome the posting of a problem question that someone needs help with here and there – but not as a continuous “quiz” in the study group.

For one thing, allowing it puts me at odds with the AICPA because they own the questions.

(unless I'm completely mis-reading things in this thread) 🙂

[Forem004]

Oh, sorry Jeff! I thought it was basically the same thing as it asking in the Ninja multiple choice! Everyone that asked for the SIM list let me know if you don't find it!

[Forem004]

I have my list printed, but I was trying to access it on the site. How do you get to it Jeff?

[Forem004]

Does anyone have a better understanding of other modifications to the cash basis of accounting other than long term debt & depreciation?

[jeff]

No worries – it's in the helpful links area where you launch your mcqs – in the same are as the AICPA released pdfs

[Rhunter]

So I'm a bit confused on something I read in the NINJA Notes, and couldn't get clarification in the actual standards.

In a compilation when financial statements omit substantially all disclosure but are otherwise in conformity with the Applicable Financial Reporting Framework, a paragraph is added after the conclusion paragraph stating that:

-MGMT has elected to omit substantially all disclosures
-If the disclosures were included, they may affect the users decisions on the FS
-The FS aren't intended for those who are uninformed on such matters

OK, I got it, or so I thought until I read that an emphasis paragraph is not a substitute for disclosure, and that the accountant should not include an emphasis paragraph in a compilation report on FS that omit substantially all disclosures unless the matter is disclosed is the FS.

Does this mean that the former paragraph should only be included when the FS being complied disclose the fact that substantially all disclosures have been omitted? If the omission is not properly disclosed in the client's FS, then the accountant is precluded from making reference to the omission in the report and needs to discuss the need for said disclosure with the client. If client refuses revisions, then the accountant should consider attorney consultation and potential withdrawal.

And finally, this rule only applies to the election to omit substantially all disclosures, not any other departures from the Applicable Financial Reporting Framework? The accountant may modify the standard compilation report with an emphasis paragraph for to disclose any other departure, whether or not disclosed in the client's FS, correct? Then the same process: determine if emphasis is adequate, discuss revision with client, then consider legal counsel and withdrawal upon client refusal.

Am I understanding this correctly? If not, can someone please set me straight?

[Forem004]

I'm sorry. I've read this three times and you're losing me. 😓

[Rhunter]

So I'm not the only one, lol. If you want to see the material directly, here are the places to look:

AR 80.20 – The paragraph stating that MGMT has elected to omit substantially all disclosures.

AR 80.26 – Statement that an emphasis paragraph should not be added when substantially all disclosures are omitted.

AR 80.27 through AR 80.29 – Explanation of handling all other departures and the consideration of withdrawal and legal counsel.

I may have just figured it out actually. The paragraph specified in AR 80.20 is added after the Accountant's Responsibility section, so it is technically not an Emphasis of Matter paragraph. This would mean that this paragraph is included anytime a compilation is issued on FS that omit substantially all disclosures, and the accountant has the option to add the EOM paragraph after the conclusion if the fact of omission is also disclosed in the FS. For all other departures from the Applicable Financial Framework, you would follow AR 80.27-29. It also seems that the non-disclosure rule of AR 80.26 only applies to EOM paragraphs concerning omission of substantially all disclosures.

[Rhunter]

Modified Cash Basis is a hybrid method of Cash Basis and Accrual Basis. It uses the Cash approach for ST items, and the Accrual approach for LT items. It's not GAAP.

[Rhunter]

Here's an article on OCBOAs that could prove useful:

https://www.journalofaccountancy.com/issues/2003/oct/ocboafinancialstatements.html

[Forem004]

Hunter, what is your study process. Are you just reading all of the regulatory sections? And thanks for your input on cash basis but I am looking for other specific modifications that can be made. The comp and review guide in our research software says that any modification can be made if relevant for GAAP and not illogical based on the circumstances for modified cash.

[Rhunter]

No, just when I get snagged on certain topics. Also, it seems more appropriate to reference the actual standards than to try and discuss the study material given that not everyone is using NINJA like myself.

[Rhunter]

NINJA? Which book and page are you referencing?

I found excerpts as follows stating basically the same thing:

Book 4, p 65
Book 5, p 30

If we are talking about the same thing, I believe this is just stating that the Cash Basis and Modified Cash Basis are considered Special-purpose Frameworks and that the modifications need to be properly supported. Neither Cash nor Modified Cash are GAAP, that's why they're Special-Purpose. The Cash Basis can be modified to meet the needs of the Special-Purpose, but the reasoning needs to be properly supported.

This is just my understanding of what I've read, I could be wrong.

The Journal of Accountancy article I linked above is really informative on this subject.

[Anonymous]

Sorry, wrong post.

[sulaiman]

I found this question in Becker software, and my question is not about it, more to be: is it possible in the exam you'll get a question that long?

“”An audit partner is developing an office training program to familiarize his professional staff with statistical decision models applicable to the audit of dollar value balances. He wishes to demonstrate the relationship of sample sizes to population size and variability and the auditor's specifications as to tolerable misstatement and risk of incorrect acceptance. The partner prepared the following table to show comparative population characteristics and audit specifications of two populations.
Characteristics of
Population 1 Relative
to Population 2
Audit Specifications as to a Sample
from Population 1 Relative to a
Sample from Population 2

Size
Variability
Specified
Tolerable
Misstatement
Specified Risk
of Incorrect
Acceptance
Case 1
Equal
Equal
Equal
Lower
Case 2
Equal
Larger
Larger
Equal
Case 3
Larger
Equal
Smaller
Higher
Case 4
Smaller
Smaller
Equal
Higher
Case 5
Larger
Equal
Equal
Lower
You are to indicate for the specified case from the above table the required sample size to be selected from population 1 relative to the sample from population 2.
In case 1 the required sample size from population 1 is:””

[Author]

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