[jeff]

Welcome to the Q2 2016 CPA Exam Study Group for AUD.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

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

[Jackobe24]

@bet10 so we can basically ignore bank record if we are looking for kiting?

@waffle_house I think I understand the differences now, thanks.

FAR - 9/8/16 (Hopefully it's my last CPA exam, God bless me!)
REG - 80
BEC - 81
AUD - 69, 81

[Progress]

To my understanding, limited and negative assurance is the same thing. Becker seems to use them interchangeably. One quesiton for ninja claimed that they are not the same.

[Anonymous]

@Operation_CPA: I don't know if I would have gotten the 2nd question right, but the big difference between the two is the word “controls”. Management is definitely responsible for the design, implementation & maintenance of all controls.

@Jackobe24: Ummm… let me clarify. For auditing purposes & the accuracy of cash asset balances, yes, only the book dates matter, so you can ignore bank dates. If, however, you are looking for fraud, bank dates could come into play.

For example, I used to have checking accounts at several banks. Depending on how I transferred money, I could have the money look like it was in both accounts on the same day. It was something like, if I told Bank A to pull in money from Bank B, they would show the deposit in my account on day 2, but Bank B wouldn't show the withdrawal until day 3. So on day 2, it looked like the money was in both accounts. So theoretically, I could have transferred $1 million every day,swirling it round & round, and making it look like I had $1M in both accounts, when really I had five dollars. So here, I could pull a kiting scheme on my banks, and buy stuff with my two million dollars. BUT, if I had accurate dates on my books, my financial reporting would be just fine. (Of course, it would probably show my being overdrawn, which might bring up going concern issues, but that's a whole other story.)

I guess the difference is that one is fraudulent financial reporting, and the other is asset misappropriation. When we are auditing cash, and we do some interbank transfer testing, we are only looking at the financial statements, so we will only look for book dates. But I guess it is possible they could ask you about kiting & asset misappropriation? The big takeaway is deposit date cannot be before withdrawal date.

I did a lot of talking here. I hope it made some sense.

[Anonymous]

In Becker's MCQ's for A5, Audit Sampling, there are several questions based on a table. The tables ask you to determine whether the sample size for population 1 should be bigger or smaller than the sample size for population 2. Many of the answers have an explanation like this:

“an increase in the risk of incorrect acceptance… result in a decrease in the required sample size”

I don't think this is right, as an increase in any kind of risk means you need a larger sample size. I think they meant to say, “an increase in the *acceptable* risk of incorrect acceptance”. What do you guys think? Am I right, or am I just not understanding something?

[SONA]

Hi Guys……….

I would like to have some study tips for AUD. Last saturday i gave FAR now want to give AUD on July 15th.

I have no idea what strategy should i use to be able to prepare myself and pass the exam.

Suggestions and tips please.

Good Luck for all of you who have exams pretty soon.

Thanks

[jpowell31]

@bet10 – “risk” is tricky…I found it even tricky to say detection risk…anyway…I think the confusing terms here are “results in”…the best way to think of this is that the auditor decreases sample size in error … if you think of it backwards, if you determine a sample size and find that it's all great and satisfactory and project it to the population there's a higher chance that you will incorrectly accept misstatements in that population given a smaller sample size. If a large sample was selected there is a higher chance that misstatements would be found and therefore not accepted….I don't think I explained that very well. this box is letting my type one letter every second and it's frustrating 🙂

[Jackobe24]

@bet10 appreciate the help!

FAR - 9/8/16 (Hopefully it's my last CPA exam, God bless me!)
REG - 80
BEC - 81
AUD - 69, 81

[Anonymous]

@jpowell31: I think I understand the concept of incorrect acceptance, but I still think the explanation that Becker gave is incorrectly stated?

If you read a problem that said Population 1 has a greater risk of incorrect acceptance than Population 2. Would you choose
(a) a greater sample size for Population 1 than for Population 2
(b) a smaller sample size for Population 1 than for Population 2.

But… how would you answer if the question said Population 1 has a greater acceptable risk of incorrect acceptance than Population 2?

[jpowell31]

I see your point. The wording is what's most difficult in this (and I guess all of these) exam(s)!!! I'd agree with you that it'd be much easier to understand using “acceptable”. I didn't see any questions like that with Ninja and haven't used Becker for some time so don't really have much context to see if we could work through this one.

[jad11]

I am having a really hard time getting research questions for AUD. I was doing very good in this area for FAR. I did find that my desktop version of Becker was not registering some of the key works/phrases I was searching for, while the online version did register them, but even then I am having trouble getting the right answer. Actually, I would say that I am having a much harder time on TBS altogether as compared to FAR. Anyone have the same experience? Any tips?

[Oneday]

On this AICPA document (https://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-C-00315.pdf) and my Roger book, it states that Analytical procedure is used in risk assessment. Why is the following problem state that the CORRECT answer is B?

When performing risk assessment procedures to obtain an understanding of internal controls, the auditor may include all of the following except:

A.
observing the application of specific controls.

B. CORRECT
performing analytical procedures.

C.
inspecting documents and reports.

D.
tracing transactions through information system relevant to financial reporting.

[TheHoundThatRides]

@ThisIsTheYear

Well it says you're performing those risk assessment procedures to get an understanding of internal control. Think about which of those options will help you understand Internal Control.

Option A will help. You're observing how controls are applied.

C will help. You'll see how documents are stamped and signed appropriately in the Internal Control process.

Option D will help. You'll take a transaction all the way through and see how controls apply to it.

Option B will help you identify potential problem areas of the financial statements. But would something like ratio analysis really tell you anything about internal control? It is a risk assessment procedure but not for the purpose in the question.

BEC - 78 (August 2015)
FAR - 80 (November 2015)
AUD - 73, 67. (Ok I gotta confess I was even more lazy this time around)
REG - August 27th, 2016

[Oneday]

Thehoundthatrides//

Thank you for the detailed answer. My roger book gives me this Memory Aid- AIIO (analytical procedure in HIGH LEVEL DATA, inspection, inquery, and Ovservation) for risk assessment in understanding I/C.

Im assuming that Roger's analytical procedure doesn't mean ratio analysis. Also the official AICPA document explicitly says analytical procedure is used… So its just confusing me as I do understand your explanation clearly…

Could there be a different explanation for this discrepancy?

Passage from Roger book:
“…obtains an understanding of the entity and its environment, including its internal control (CRIME) through the performance of risk assessment procedures. As the name implies, these are proceduresdesigned to provide the auditor with an adequate understanding to enable the auditor to effectively assess the risk of material misstatement of the financial statements. Risk assessment procedures include:

-Analytical procedures(Using high level data)
-Inquiriesof management and others within the entity, including inquiries of internal auditors.
-Inspection
-Observation”

[Oneday]

Heck, Roger even has a mcq question that looks like this…

Identify the correct statement(s) regarding analytical procedures conducted while obtaining an understanding of the entity and its environment, including its internal controls, during an audit:

I. Analytical procedures conducted while obtaining an understanding of the entity and its environment are considered risk assessment procedures and are required.

II. As a planning analytical procedure an auditor may plan walkthroughs of internal control processes in order to gather information for risk assessment on the client’s internal control environment.

III. As a planning analytical procedure an auditor may develop an expectation for the current period’s net income on the basis of the client’s interim forecasts and interim financial statements.

I and III only (correct)

II and III only

I, II, and III

Im super confused…

[Jackobe24]

hey guys,

does changing accounting “method” like depreciation calculation result in an addition of emphasis of matter paragraph to the unmodified opinion?

I feel like there is contradicting answers in becker about this…

I thought only changing accounting “principal” would require emphasis matter of paragraph, but there is an answer telling me it would.

I know changing depreciation life year would not result in emphasis of matter paragraph.

FAR - 9/8/16 (Hopefully it's my last CPA exam, God bless me!)
REG - 80
BEC - 81
AUD - 69, 81

[Author]

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