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December 19, 2016 at 6:26 pm #1396514jeffKeymaster
Welcome to the Q1 2017 CPA Exam Study Group for AUD. 🙂
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December 29, 2016 at 1:04 pm #1402350JT3113Participant
I am having difficulty with the ratio sections. Does anyone know of any good sources to really help me understand each ratio. I want to know how each ratio is affected based on different circumstances. Thanks!
December 29, 2016 at 4:47 pm #1402551NodiraParticipantI am taking Audit for the 4th time on 01/16/2017. I have had worst luck with Audit and this is my LAST window before two of my exams expire
If I don't get it this time, I lose everything. It will be busy season(TAX) and FAR will expires too. #PrayingtotheCPAGods
AUD – 55/60/63 currently using Becker, Roger, Gleim and now looking into Ninja
BEC – 76 expired 01/31/17 – used Becker
FAR- 71/77 – Used Becker
REG- 89 expires 01/31/17 – Used BeckerDecember 29, 2016 at 11:40 pm #1402800rc5190ParticipantDecember 30, 2016 at 7:33 am #1402856HollyParticipant@rc5190 I don't think so. I'd like to know this as well because I plan on starting to study for FAR 1/10.
BEC - 79
REG - 85
AUD - 5/27/16December 30, 2016 at 3:29 pm #1403160ineeda75pleaseParticipantHelp PLEASE! Ok I am working on inherent risk and control risk. I am not sure if you have a increase/decrease in one of the risk it will affect the other. I have just seen a simulation that had control risk and inherent risk and a situation and you had to say if it increased, decreased, or didn't effect this risk. Is it a situation by situation determination or can it safely be said if it affect one it will not affect the other?
Thanks in advance!
This one got me on my last attempt and I am not letting it get me again.BEC - 71, 76 PASSED! Becker
FAR - 70, 08/2016 Becker and Ninja Notes (2nd)
REG - 7/2/2016 Becker and Ninja Notes
AUD - 7/27/2016 Becker and Ninja NotesDecember 30, 2016 at 5:31 pm #1403348AnonymousInactiveAudit Risk = Risk of Material Misstatement * Detection Risk
Audit Risk = Inherent Risk * Control Risk * Detection Risk
The overall purpose of an audit is to reduce audit risk to a low level, so you can look at it from a numbers perspective too. So if inherent risk is a high number or it is increasing, control risk has to be lower, so the overall probability is lower. Otherwise by just increasing inherent risk, the entire audit risk increases which defeats the purpose of an audit.
If you remember from math class 1,000,000 * .001 = a small number.
Hope that makes a little sense to you. Cheers!
December 30, 2016 at 5:51 pm #1403355ineeda75pleaseParticipantMakes sense @cessnapilot30! Thank you!
BEC - 71, 76 PASSED! Becker
FAR - 70, 08/2016 Becker and Ninja Notes (2nd)
REG - 7/2/2016 Becker and Ninja Notes
AUD - 7/27/2016 Becker and Ninja NotesDecember 30, 2016 at 6:41 pm #1403367Forem004ParticipantWhat exactly do you mean by increasing inherent risk since thaTs out of our control?
December 30, 2016 at 6:59 pm #1403373AnonymousInactiveI was just approaching it from a numbers perspective..the formula is too conceptual.
So if we are assuming our judgement of inherent risk increases( crappy internal control) then to maintain the same numerical value of audit risk, then control risk has to decrease
Example
AR = IR*CR*DR
(.006) = .1*.3* .2 (numbers assumed)if in our judgement we think inherent risk is higher (now .3 instead of .1,then to maintain the same .006 for audit risk then
.006 = .3*.1*.2 so now control risk has to decrease if we increase judgement for inherent risk.
Sorry for the long winded post, but does it make sense?
P.S. I am so sick of studying for Audit and I just started… I would rather take FAR again
December 30, 2016 at 7:28 pm #1403381Forem004ParticipantYes. I thought you were saying as “we” increase it. I loved studying this for the first bit. But then I had a Terrible exam and I'm sick of studying too!
December 30, 2016 at 9:46 pm #1403423thebigguy1992Participantdoes anyone know why “auditors first cause on Balance Sheet accounts, then associated Income Statement items”?
I remember from the ninja MCQ that there were questions saying that income statement items are more predictable, so its better to use those items first because of that reason. why should auditors first focus on balance sheet accounts?
December 30, 2016 at 10:10 pm #1403427RhunterParticipantInherent Risk and Control Risk are independent in the way that you're asking. An increase in IR will not increase CR, nor vice versa. IR x CR is actually the Risk of Material Misstatement (RMM). Now and increase in IR or CR will increase both RMM and Audit Risk (AR).
Inherent risk is how likely a relevant assertion is to be materially misstated in the absence of internal controls.
Control risk is the risk that the Control Activities won't prevent or detect those misstatements.
Put another way, IR is the likelihood that a misstatement will occur, while CR is the likelihood that Internal Controls won't prevent or detect the misstatement when it does occur.
An increase in Inherent Risk would not affect Control Risk, but it is part of the consideration in determining the N,T,E of the audit procedures to obtain evidence that controls are working properly.
Remember, the auditor can only change Detection Risk in response to IR and CR. This is done through Substantive Procedures. Higher IR x CR (RMM), the more reliable, relevant evidence you need to reduce your Detection Risk. One trick to remember this is to rearrange the audit risk formula to isolate DR, like this:
AR/IRxCR = DR
This also helps to demonstrate the inverse relationship DR has to both IR and CR.
IR and CR are given, they exist as part of the client's business. AR is a judgment call by the auditing firm. It's how much risk they're willing to take that they will sign off on materially misstated financial statements. If the nature and environment of the client's business is risky, and their Internal Control is weak, the only thing the auditor can do in response is modify the Nature, Timing, and Extent of their audit procedures to reduce both DR and AR.
Hope this helps!
December 31, 2016 at 12:15 pm #1403652HollyParticipantI'm trying to get to the Review Phase of NINJA MCQ. There are so many questions!!
BEC - 79
REG - 85
AUD - 5/27/16December 31, 2016 at 5:56 pm #1403853Double-entry DeviantParticipant@ HRSexton – you can do it. I did it 5 questions at a time….little by little and then *poof* you're done!
What are you trending at now?
REG: 5/30/15 - 77
FAR: TBD
BEC: 8/31/15 - 70, 73, 1/8/16 - 77
AUD: 6/1/16- 73, 8/2/16December 31, 2016 at 11:07 pm #1403912 -
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