[jeff]

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

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

[Anonymous]

Hi ninjas,

I am currently studying for AUD and I'm wrapping up A2 in Becker. I used the NINJA MC to supplement for BEC, which I believe help me tremendously. Everybody's different, but realistically do you think I have enough time to sufficiently study for and take AUD Jan 30th? Any advice..

Thanks!

[thebigguy1992]

@sulaiman it was from the final exam #2 from becker so i dont think i can get it.

so you are saying if its an examination, compilation, or review it is SSARS for a non-issuer, but if its for an issuer they use SSAE…??

[Holly]

@thebigguy1992 I came across this question and chose that answer based solely on the reasoning that I think in a review you don't inquire outside of management. No confirmations. Does that sound right to y'all?

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

[Smith]

On Saturday!

[sulaiman]

@thebigguy1992

Well no, for examination because it is always SSAE, but for review and compilation, yes! non issuers use SSARS. Also, remember that compilation is only allowed for issuers under one circumstance which is for prospective FS

@HRSexton

That sounds correct because in a review, we don't inquire or confirm beyond the entity itself

[thebigguy1992]

@sulaiman let me also get this straight. if you are doing a review of interim financial statement of an issuer, you are required to get an understanding of their internal control because they are public (you dont have to test controls though). for a NON-issuer review of interim financial statements, you dont need an understanding of internal control, nor do you have to test controls (obviously). correct?

also, can you tell me how an examination is different from a review/compilation and a full audit? is an examination mostly just dealing with forecasting/projections?

[thebigguy1992]

i know these are super old but i found some youtube videos where jeff goes over a few MCQ for audit and its nice to hear his explanations and see the whole ninja word problem and answer on the full screen.

[sulaiman]

@thebigguy1992

I would say yes for your first question but keep in mind, even for issuers, if there is a better answer than understanding internal control, you should choose it. That's why I asked you if you have all four answers. Again, if you compare understanding of internal control to inquire the entity’s attorney, it's seems the former would need less work than a confirmation besides it's within the entity itself, so I think that's why you got it wrong.

About examination, you can use it for services including prospective FS, Pro forma FS, Internal control, Compliance, and MD&A. Review(in SSAE) can be only for pro forma and MD&A. Agreed upon procedures can be for prospective FS, internal control and compliance. Compilation (using SSAE) only for prospective FS.

To differ examination from audit, review, and compilation, think of it this way (more work to less work to do)
1-Audit (issue opinion)
2- Examination (positive assurance)
3- Review (negative assurance) –
4- Compilation and Agreed upon procedures – Do not express opinion (and indicate that in your report)

I hope that helps

[thebigguy1992]

I'm going over some professional responsibility questions and I just came to a question where it asked what would impair a covered members independence. The answer was a munipal bond, and materiality is not a factor. Since when is a municipal bond a direct financial interest…? I was under the impression the direct financial interest was owning stock in the client. Munipal bonds sorta came out of no where for me. Besides those two, what are any other examples of direct financial interests I should know?

[thebigguy1992]

Also, can anyone confirm exactly what assertions are being tested when you are sending out positive confirmations? I am assuming it mostly is just existence and rights/obligations, correct? I feel like it can not prove valuation because in a confirmation if someone has a higher balance than what it actually is, you can't rely on them to correct that balance, so valuation/accuracy isn't really being tested. Am i correct?

[Holly]

@thebigguy1992 That's what I think (ugh) about A/R and the assertions. I think when valuation is used with A/R it's for the determination of uncollectible accounts.

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

[thebigguy1992]

Reporting on internal control under Government Auditing Standards differs from reporting under generally accepted auditing standards in that Government Auditing Standards require a:
A.

statement of positive assurance that internal control procedures designed to detect material errors and fraud were tested.
B.

written report describing each significant deficiency observed, including identification of those considered material weaknesses.
C.

statement of negative assurance that internal control procedures not tested have an immaterial effect on the entity’s financial statements.
Incorrect D.

written report describing the entity’s internal control procedures specifically designed to prevent fraud, abuse, and illegal acts.

why is the answer B…? i thought that under GAAS in an audit for an issuer you also have to have a report on internal control and tell the audit committee if there were any significant deficiencies or material weaknesses?

[thebigguy1992]

Government Auditing Standards (the “Yellow Book”) require a written report on internal control in all audits. (This is different from GAAS reporting requirements.)

^^how is this different from GAAS reporting requirements..? is it for only issuers do they require a report on internal control and not for non-issuers?

[thebigguy1992]

Which of the following nonfinancial information would an auditor most likely consider in performing analytical procedures during the planning phase of an audit?
A.

Turnover of personnel in the accounting department
B.

Objectivity of audit committee members
Correct C.

Square footage of selling space
D.

Management's plans to repurchase stock

why is the right answer C….how does square footage of selling space constitute NONfinancial data..?

[Forem004]

@thebigguy1992, your internal control report is the same report that is referenced regarding sig. def. & mat. weaknesses.

Your next question about the square footage…that is the only answer that can be tested analytically rather than just judgement and reasoning.

[Author]

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