[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

[HoosierCPA]

@Just3letters haha, I agree its a strange question. I actually got it wrong and wanted to see what people thought without knowing the right answer ahead of time–the answer is C. I honestly thought the same as you and wanted a “none of them”.

Awesome work going 3 for 3 so far on your exams. This is my first exam solely using ninja mcq's. I'm trending and averaging right at 80% and have about 100 questions more before I've made my first pass through all MCQ's. How do you typically approach you final couple weeks of review? I take my exam on the 20th.

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

[pharaoh]

It is the arm's length transaction answer. Let's see if I can explain it in a non confusing way because it is confusing enough 🙂

Related Party transactions DISCLOSURES usually focus on the transactions that will not happen in the regular course of business like obtaining loan with zero interest or lower than the market interest, no maturity date loans, sale of assets below market value, etc.., so they have to be disclosed.

Arm's length is a regular transaction with regular terms but with a related party, So making that disclosure can be misleading to the readers or can be considered inadequate disclosure

That's the best of my understanding regarding that matter. I was confused a lot about it but bottom line, you are trying to disclose the unusual transactions and arm's length has nothing unusual about it.

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

[HoosierCPA]

@pharaoh thanks that does clear it up quite a bit. The first 20 times the wording of the question was funky, I was having a hard time following it. After 20 times it finally is starting to click and your explanation just solidifies that so Thanks!

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

[HoosierCPA]

A lawyer's response to an auditor's inquiry concerning litigation, claims, and assessments may be limited to matters that are considered individually or collectively material to the client's financial statements. Which parties should reach an understanding on the limits of materiality for this purpose?

A.The board and the client's management

B.The client's audit committee and the lawyer

C.The client's management and the lawyer

D.The lawyer and the auditor

Obviously D is the best choice of the options provided. However, how would the lawyer have any idea if the matters are material in respect to the financial statements? They are not involved in the financials at all? My understanding is the auditors assess the financials, determine contingent liabilities, if they are determined material enough that they want to see the likely hood that the liability will need to be accrued and for what amount they will inquiry the lawyer to corroborate the information.

I read the question as solely determining the materiality as it related to the financials. I understand they would need to go to the lawyer for their opinion if they deemed it necessary but NOT for materiality reasons.

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

[Just3Letters]

@Dtatham10,

haha thanks! I feel like it was 70% preparation and 30% good guessing.

I have made myself a pretty solid preparation strategy throughout the process:

1. Go through each Becker lecture even if I think it is pointless. I always figured the point of Becker was not to learn accounting. I know accounting because I graduated from college. The point of Becker is to learn those tips and tricks for the exam which they hide in the middle of those boring lectures. I honestly feel like the test tips and the “pass keys” have helped me. I just wish Becker would make a video for each test just talking about test taking tips strategies and the pass keys. So I go through each lecture once taking lots of notes in a notebook.

2. After Each lecture, I go back through the extensive notes I took and create notecards for the stuff I put stars next to or otherwise marked as important or as stuff I didn't know before. At the end of each section (including Audit) I have about 200 notecards. It just turns out that way. I read the notecards twice M-F on the bus to work and on the way home. Helps a lot!

3. I save all Ninja MCQ for my final review. I love Ninja because it adapts to what you are struggling with. At the beginning of studying each section I'm struggling with everything so that wouldn't be helpful. Once I get through all the material, I purchase Ninja MCQ and use that for about 3 weeks of final review prior to my test. I have consistently averaged in the high 70s/low 80s through thousands of questions on ninja and I'm always trending in mid 80's before I go in to my exam. I think this reflects pretty well in my consistent exam scores haha

4. For final review, I do sets of 100 MCQ on Ninja each day after work. I only allow myself 1.5 minutes per question but usually average around 50-60 seconds. This helps me get ready for the pace of the test. One Saturdays and Sundays, which I'm about to begin for today, I do three sets of 100 MCQ.

OK, now back to studying. Have a great study day everyone 🙂

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

[HoosierCPA]

@just3letters thanks! Sounds like I'm slacking on the questions. I have only made my way through about 1600 questions–i try to get around 50-80 on the weekdays and 150-200 on the weekends.

Quiz for everyone! (This one tripped me up)

Select the internal control that most likely could assist MMI in preventing or detecting the misappropriation of a customer's check.

A.Monthly statements are mailed to all customers with outstanding balances.

B.Remittance advices are separated from the checks in the mailroom and forwarded to the accounting department.

C.Total amounts posted to the accounts receivable ledger from remittance advices are compared with the validated bank deposit slips.

D.An employee other than the bookkeeper periodically prepares a bank reconciliation.

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

[HoosierCPA]

Which of the following procedures most likely would assist an auditor in determining whether management has identified all accounting estimates that could be material to the financial statements?

A.Inquire about the existence of related party transactions.

B.Determine whether accounting estimates deviate from historical patterns.

C.Confirm inventories at locations outside the entity.

D.Review the lawyer's letter for information about litigation.– CORRECT

I've missed this enough times so I finally was able to get it right. To me answer B would give you more of an idea if you have the majority of your estimates accounted for. D to me only would tell you if their is an unusual accrual that may need to be made. Why they claim D is the best for “management has identified ALL accounting estimates…” is super confusing to me–anyone care to elaborate on how a laywers letter will tell me if I have made my payroll accrual, reserve accruals, and all misc accruals associated with monthly financials that I know for a fact the lawyer would have no clue about…so frustrating! lol

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

[Just3Letters]

@Dtatham10,

Question 1: I would say B.

Question 2: Hmmm… I probably would have chosen B if not given the answer. However, I can see D if you really get in to the nitty-gritty of it. If you are told by management or a lawyer that there is a more-than-likely (probable) chance that you will lose a lawsuit, you must record an estimated continent loss related to the lawsuit. This is straight out of REG study stuff. If you can estimate a loss, pick the low end of your estimate and record the contingent loss on your books.

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

[Chelsea26]

Question 1 – Is it A?

BEC - July 2016 → 78
AUD - Sep 2016
REG - Nov 2016
FAR - Feb 2017

[HoosierCPA]

I chose B but the actual answer is A :/. I'm watching the Cubs game right now but I will see if I can get the explanation off Ninja later.

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

[Just3Letters]

Anybody know why B is not correct here? I would think if you had lower profitability than your competitors it would increase your willingness to cook the books. I get how D would be correct. I just don't see how B is not correct.

Which of the following factors most likely would heighten an auditor's concern about the risk of fraudulent financial reporting?

A.
Large amounts of liquid assets that are easily convertible into cash

Incorrect B.
Low growth and profitability as compared to other entity's in the same industry

C.
Financial management's participation in the initial selection of accounting principles

D.
An overly complex organizational structure involving unusual lines of authority

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

[HoosierCPA]

@just3letters the reason I don't believe B is correct is because they are saying they have low profitability compared to other entities in the same industry. They aren't saying there is a lot of pressure to keep up with comparable entities. The fact that they explicitly state they have low profit means they haven't cooked the books to try and keep up.

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

[CPASF1]

Hi everyone,
from what I understand is that since july 2013, instead of using the 10 generally accepted auditing standards we now have what are called the Clarity Standards (Applicable Financial Reporting Framework), but i still see that Roger still covers a mneumonic for the 10 GAAS and has a lecture on it. should we still know that in detail? what is the significance of that for the cpa exam and accounting today? Thanks!

[Just3Letters]

Thanks Dtatham10,

totally makes sense.

@CPASF1,

this is my last exam and I work in auditing and I've never heard of this new standard. Definitely not even considering that for the exam.

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

[Just3Letters]

OK I realize I should know this from FAR but completely forgot…

If a sale is recorded FOB Destination, is it the entire transaction including ar/sales and cogs/inv isn't recorded until inventory reaches buyers destination or is it ar/sales recorded when PO is made and cogs/inv recorded when at destination?

Confusing but I don't know how to better word this haha

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

[Author]

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