[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]

@trele6 I doubled checked my notes real quick. Here is what I wrote:

Lead auditor and concurring partners MUST rotate every 5 years…other audit partners must rotate every 7.

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

[HoosierCPA]

to add “other partners” include partners who have responsibility for decision making on significant accounting, accounting or reporting matters, or who maintain regular contact with management and audit committee of the client.

–that's word for word out of becker.

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

[Anonymous]

If the “Other Partner” has the responsibility for decision making on significant accounting/reporting matters and maintains regular contact with management and audit committee of the client, who is superior? ————————The lead/concurring partner OR the other partner??

[thebigguy1992]

so I'm watching the ninja plus videos for audit, and bob says to remember the audit report word for word. is this really true/necessary for audit…?

[HoosierCPA]

@amor to me it sounds like the other partner is the superior. Using real life as an example our external auditors have entry level positions (staff) and managers who regularly review and handle our year end audits. They do the grunt work, ask questions, do the analytical procedures, etc to formulate and opinion. Also, there is a partner who periodically steps in (maybe weekly during year end audits). When it comes to finalizing their conclusions there is another partner of the firm, which we only see basically when the audit is done–he comes in and reviews the work at a high level. This sounds like the “other partner” that must rotate every 7 years. The lead auditor and concurrent partner sounds like the ones doing most the grunt work and are much more involved in the audit–they rotate every 5 years. I would imagine since they are more involved their is a higher likely hood of independence being impaired so as a result they have the 5 year rotation-and not 7.

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

[HoosierCPA]

Pretty simple concept but need to iron out one small detail that seems to be contradicting itself in ninja.

When an auditor tests a computerized accounting system, which of the following is true of the test data approach?

A.Test data must consist of all possible valid and invalid conditions.

B.The program tested is different from the program used throughout the year by the client.

C.Several transactions of each type must be tested.

D.Test data is processed by the client's computer programs under the auditor's control. — CORRECT

Ninja explanation: “By definition, the test data approach is the use of simulated transactions to test the processing and controls of the client's computer programs while the client's computerized accounting system IS under the auditor's control.”

Now another Ninja question, I only screen shotted the explanation so I don't know what the actual question was but here is their word for word explanation:
“Test data is introduced into the clients computer system using the same program to operate the application being tested. This type of control testing is NOT under the auditors control, as it uses the client's actual program”

So basically I just need to know–is test data under the auditors control or is it not?

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

[Anonymous]

The test data is under the auditor’s control while the program is under the client’s control. From Becker’s book, test data approach refers to a technique in which the client’s application program is used to process a set of test data, the results of which are already known by the auditor. If the client's program is operating effectively, it should generate the same results determined by the auditor. The auditor develops to test programmed controls. For example, if the client has a programmed control that requires a supervisory approval (a supervisor password) for transactions over $500, the auditor would then create test data to determine if the system would accept a transaction over $500 without a required supervisor password approval.

[thebigguy1992]

so I’m watching the ninja plus videos for audit, and bob says to remember the audit report word for word. is this really true/necessary for audit…?

[Anonymous]

We are not going to write an essay in AUD, so remembering the audit report word for word is not necessary. I’d remember all the components and restrictions of each report. It’s like learning to cook a dish and being able to include all the necessary ingredients when you buy them at the grocery and cook them at home.

[thebigguy1992]

ok thats what i thought. i feel like that would be pretty dumb to memorize a whole paragraph worth of info because the sims you dont even have to write anything

[Josh]

@Amor d & everyone,

you are correct. A financial projection is based on the responsible party’s assumptions reflecting conditions it expects would exist, and the course of action it expects would be taken, given one or more hypothetical assumptions.

The range is what gave this away for me. Sorry, for the delay. I was doing this simulation when I posted it right before work the other night. Time to buy rice 🙂

[NYaccountingstudent]

I suck at Becker Chapter 4-Audit Evidence.

Which of the following internal control activities is not usually performed in the vouchers payable department?

a. Accounting for unused prenumbered purchase orders and receiving reports.

b. Indicating the asset and expense accounts to be debited.

c. Matching the vendor's invoice with the related receiving report.

d. Approving vouchers for payment by having an authorized employee sign the vouchers.

Here is Beckers Explanation….Even after reading the explanation I still dont get why this is right

Choice “a” is correct. Accounting for unused prenumbered purchase orders and receiving reports is an effective control, but it would not typically be performed in the vouchers payable department.

[NYaccountingstudent]

Another Audit Evidence question that i do not understand

After making inquiries about credit granting policies, an auditor selects a sample of sales transactions and examines evidence of credit approval. This test of controls most likely supports management's financial statement assertion(s) of:

Rights and Obligations —– Allocation and Valuation

Yes —– No
Yes —– Yes
No —– Yes
No —– No

Choice “c” is correct. By ensuring that credit approval is obtained before goods are shipped to customers, the auditor is testing management's assertion that accounts receivable are collectible (allocation and valuation). Ensuring that credit approval is obtained before goods are shipped does not support the rights and obligations assertion.

My question. Wouldnt checking that credit was obtained prove that they have the rights to collecting the inventory? Why wouldnt it be Yes-Yes

[HoosierCPA]

@NY it can get tricky trying to explain transaction cycles but I will try my best with your accounts payable question.

Many times accounts payable testing relies around testing “3 way match”. A 3 way match is matching 3 documents together to make sure they agree before creating the voucher in the system, or another way of saying it before putting the invoice into your system. The 3 documents that need to agree in this testing are the Purchase Order, Receiving report, and Invoice.

Purchase order and Receiving report are not responsibilities of the AP dept however, the AP dept does need to look them up in the system to make sure they agree with the Invoice.

Responsibilities:

Purchase Order — Purchasing Dept
Receiving Report — Receiving Dept
Invoice — this is an external document created by the vendor and more times then not sent directly to the Accounts payable dept.

Because A deals with the handling of unused “receiving reports” and “purchase orders” as you can see from my list above that is not their responsibility. Simply put, Accounts payable receives the invoice, looks in the system to match with the PO and Receipt, if they don't match they ask questions with the respective dept (receiving prob would contact the receiving dept and purchase order discrepancy would go to the purchasing dept).

Hopefully this clears things up a little bit–or at the very least doesn't confuse you even more! haha

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

[HoosierCPA]

@NY for the 2nd part. I can't help you up too much. I would have gotten this correct but mainly because I've always correlated credit checks with valuation. Typically auditors will look at credit checks to see the reasonableness of the allowance for doubtful accounts. If you are extending credit to many customers with bad credit and you have a small allowance for doubtful accounts then an auditor can reasonably say that you have understated your expense…which all relates to the valuation of the AR account.

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

[Author]

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