[jeff]

Welcome to the Q4 2016 CPA Exam Study Group for AUD.

If this is your first post in the study group – please post your target exam date (just the time frame to preserve your anonymity), and your past history with this exam (optional, of course).

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

[renma]

@dtatham10 Aah, that makes sense, thank you! There are so many questions I've gotten wrong because ‘but that could happen….' which is super frustrating. It's hard for me to pinpoint an answer as absolutely and only correct (except some that are strictly fact based/straight up memorization) so my usual plan of attack is to try and eliminate the ones that are wrong instead, hahah.

[Anonymous]

Taking AUD in November and have not scheduled the other exams. Anybody successfully use Steve Martin's MDS studying material have any tips using this material?

[Anonymous]

Just looking for other peoples experience with this material and if they have any study tips

[HoosierCPA]

A scope limitation sufficient to preclude an unmodified opinion always will result when management:

A.prevents the auditor from reviewing the working papers of the predecessor auditor.

B.engages the auditor after the year-end physical inventory is completed.

C.requests that certain material accounts receivable not be confirmed.

D.refuses to acknowledge its responsibility for the fair presentation of the financial statements in conformity with GAAP. — CORRECT

I swear I've gotten other questions and read in the becker material that when management refuses to allow you to speak with the predecessor auditor that is an automatic withdrawal from the engagement? To add to that, if management allows it however the predecessor auditor does not allow you to review their work then it's a scope limitation and not a withdrawal.

Based on that I went with A since I thought the engagement should have never taken place let alone issuing an unmodified opinion

D also sounded good to me so it was one of those 50/50 guesses and cross your fingers to see if you're correct! haha. Reason I talked myself out of D was because if you were basing your report off special framework accounting you may not be in compliance with GAAP and as a result there would be a possibility of management refusal and an unmodified opinion??? Maybe that's a stretch–IDK!

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[Just3Letters]

Anybody else understand this? The wording is weird but regardless you wouldn't “Modify an unmodified report” if the related party transactions was acceptable i.e. “arm's length”. I would argue that the other answers would all result in modifying an opinion. Help?

An auditor most likely would modify an unmodified opinion if the entity’s financial statements include a footnote on related party transactions:

Incorrect A.
disclosing loans to related parties at interest rates significantly below prevailing market rates.

B.
describing an exchange of real estate for similar property in a nonmonetary related party transaction.

C.
stating that a particular related party transaction occurred on terms equivalent to those that would have prevailed in an arm’s-length transaction.

D.
presenting the dollar volume of related party transactions and the effects of any change in the method of establishing terms from prior periods.

You answered A. The correct answer is C.
An unmodified report opinion should only be issued in regard to related party transactions when related party transactions are substantiated (e.g., the related party transaction was equivalent to arm’s-length transactions). If the transactions are unsubstantiated with regard to related party transactions, a qualified or adverse opinion should be issued.

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Just3Letters]

@Dtathham10,

D is the correct answer because D is one of the major representations made in the Rep letter from the client. If you don't receive a proper rep letter from the client you should always disclaim an opinion or withdraw.

If you are prevented from viewing work papers this may be a scope limitation if you can't perform alternative procedures to become comfortable with prior year. C is the same thing where alternative procedures would be performed if possible before resorting to qualfied opinion because of scope limitation. Also same thing with B… try to do alternative procedures to verify beginning inventory.

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[HoosierCPA]

@just3letters thanks, D definitely sounds like the more correct answer after you explained it. Would you be able to elaborate on my logic on A. I understand its A is a scope limitation. I may look around for some of the questions I have stumbled across. I can't remember if it was to strongly consider not accepting the engagement or to not accept the engagement at all if management refuses to allow you to inquire or review the predecessor auditors work. Obviously the verbiage makes a big difference.

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[HoosierCPA]

@just3letters I know at this point I am beginning to talk to myself in this thread but I found the question that tripped me up.

Before accepting an engagement to audit a new client, a CPA is required to obtain:

a.An understanding of the prospective client's industry and business.
b.An assessment of fraud risk factors likely to cause material misstatements.
c.The prospective client's signature to a written engagement letter.
d.The prospective client's consent to make inquiries of the predecessor. — CORRECT

This is confusing because in the question itself it reads as if you need consent in order to accept the engagement. However when you read the explanation it reads otherwise. It makes it sound like you would more likely then not reject the engagement but ultimately its the auditors decision.

Explanation:

“Choice “d” is correct. In a new client relationship, it is mandatory to make inquiries of the predecessor auditor. Client permission is needed, however. If the client is unwilling to agree to this procedure, the auditor should consider the implications and decide whether to accept the engagement.”

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[pharaoh]

@dtatham10 – Before accepting the engagement, you are trying to make sure that management doesn't lack integrity which is one of the main points of communicating with the predecessor. Yes I can see your point about how the answer is written, Yes you are trying to avoid working with management with lacks integrity but you can work with them at your own risk 🙂

FAR 8/2016
AUD 1/2017
REG TBD
BEC TBD

[HoosierCPA]

@pharaoh Thanks.

Quiz:

An auditor most likely would modify an unmodified opinion if the entity’s financial statements include a footnote on related party transactions:

A.disclosing loans to related parties at interest rates significantly below prevailing market rates.

B.describing an exchange of real estate for similar property in a nonmonetary related party transaction.

C.stating that a particular related party transaction occurred on terms equivalent to those that would have prevailed in an arm’s-length transaction.

D.presenting the dollar volume of related party transactions and the effects of any change in the method of establishing terms from prior periods.

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[Just3Letters]

@pharaoh,

I hate this question. I think the wording is wrong or intentionally misleading to the point I don't understand it. It sounds like the question is asking “Which of the following situations results in a modified opinion?” to which I would answer none of them? However, answer C is definitely the one that sticks out as something I would be particularly comfortable with because of the “arm's length transaction” part.

If the question stated “Which of the following situations would not lead an auditor to consider unacceptable related party transactions?” I would say C.

Regardless, this questions is dumb and I'm sure I didn't help.

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Just3Letters]

Update I talked to other people in my office and we all agree that question is stupid and worded incorrectly. The people I talked to already passed the exam so there's that.

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Mel]

Took AUD tuesday and i think it really well. Won't get results until Nov 4.

REG - first try 71, 84
BEC - 79
FAR - 05/2016
AUD - TBD

[Just3Letters]

Hi Mel,

congrats on feeling good about your test! I felt pretty good about my first 3 and they ended up going as expected so I'm sure you passed!

Any tips from your experience without breaking the rules? I have no idea about what to expect on sims

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[caotran]

I will start studying AUD (first time taking AUD) this Saturday. Anyone can give me advice of which chapters should I study first ? Which subjects should I focus on? (I passed FAR and just took BEC, waiting for BEC score).
Thank you.

[Author]

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