[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

[Josh]

You guys got it. It's misleading. “Furthermore, some courts have held that such an arrangement may be a de facto partnership, and the individual CPAs may be liable for the obligations of the de facto partnership and of the de facto partners.” Gleim. (“Other Responsibilities). Sorry, I was watching some “Planning and Risk Assessment” videos. I keep falling asleep.

[Josh]

@Laura – you using Ninja MCQ?


@CPAWarrior – C; Both?
I've been comparing these “Core Concepts” with other notes. Gleim's actually got good material. It's taken me a little while to figure that out; but Gleim talks about it in System for Success 6.7; they are “foundational.” 🙂

[George]

@jalls Yes C is the correct answer. I got it wrong the first time.

[jeff]

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

[KJ]

C – Review Checklist.

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[pharaoh]

my first reaction “WTH, I see 3 good answers”

Which of the following statements is correct about an auditor's required communication with those charged with governance?

A.Any matters communicated to those charged with governance also are required to be communicated to the entity's management.

B.The auditor is required to inform those charged with governance about significant errors discovered by the auditor and subsequently corrected by management.

C.Disagreements with management about the application of accounting principles are required to be communicated in writing to those charged with governance.

D.Weaknesses in internal control previously reported to those charged with governance are required to be communicated to those charged with governance after each subsequent audit until the weaknesses are corrected.

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

[HoosierCPA]

@pharaoh I believe the right answer is B.

A– I'm assuming this is the one you ruled out immediately.

B– Even though it was corrected it's irrelevant. Significant errors need to be reported to governance.

C– Key word in this one is “writing”, communication can be done in either writing or orally

D– If deficiencies have been communicated in prior periods they are not required to repeat the communication.

Of the choices, D was the one that had me on the fence. I was able to find the answer in Becker A5-26. Another key note is all these deficiencies should be communicated within 60 days of the report release date!

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

[HoosierCPA]

having said that I swear there was some sort of communication that needs to be re-communicated if management has not made the appropriate changes. I have been searching for what it might be but cannot find it.

Am I making this up?

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

[cpaMD86]

@dtatham10

It's funny, in Wiley's Test Bank…answer choice ‘D' reads; “need not be re-communicated”, which of course makes it an incorrect answer. But, in this context it is definitely a viable answer choice.

FAR: 9/3

[HoosierCPA]

So an integrated audit is audit the effectiveness of IC along with the audit of the financials. My question–the report on the effectiveness of IC–is this a restricted use report? I want to say yes but I cannot find the answer.

Another thing somewhat confusing dealing with this is integrated audits are required for issuers. However when you read the audit report in the auditors responsbilities paragraph of the audit report it reads…

“the auditor considers IC relevant to the entity's preparation and fair presentation of the financials…but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control”

Is OPINION the key word in the audit report? They test for the effectiveness and report on it but they do not express an opinion?

Freaking out a little bit with my exam being tomorrow!

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

[George]

The procedure, “The accountant should modify the accountant's report if there is a change in accounting principles that is adequately disclosed,” is:

A.
required for a review only.

B.
required for both a compilation and review.

C.
not required for a review but required for a compilation.

D.
not required for either a compilation or a review.

I picked D for this one, but NINJA MCQ marked it wrong ?!

Even the answer points to D !

A change in accounting principle “is a change from one accounting principle in accordance with the applicable financial reporting framework to another accounting principle in accordance with the applicable financial reporting framework when (1) two or more accounting principles apply or (2) the accounting principle formerly used is no longer in accordance with the applicable financial reporting framework. A change in the method of applying an accounting principle also is considered a change in accounting principle.” (AU-C 708.A4)

Changes in accounting principles need to be disclosed, but the SSARSs do not directly address any report modifications for them. AR-C 80.63 states that changes in accounting principles are to be placed in an other-matter paragraph in the accountant's report. Absent specific guidance for this situation, the accountant should follow the guidance for departures from the applicable financial reporting framework.

[George]

Is anyone else's NINJA MCQ acting up ? Sometimes when i view the end of one my sessions, it shows that I skipped over a question.

[pharaoh]

@dtatham10 – So back to my question, You are right, the answer is B. I picked D though because I thought that auditor should repeat communication and here is what I found

Financial statement audit: Need not to repeat previous communication

Engagement to examine internal control: Must repeat communication if still exists

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

[pharaoh]

@dtatham10 – Now to your question 🙂

Yes Integrated audit is auditing financials + IC —-> usually issuer

And I understand how confusing this is because it threw me off for long time, even though the focus is on public companies and controls and stuff …..the reports focus on “NON” issuers.
For a NON issuer, generally you audit the financials and you have to understand the controls because it can help you in the planning and risk. You do test of controls to make sure you did enough work to cover your A** that you are doing less substantive testing but not for the purpose to issue an opinion on the controls. On this one, you ONLY test the controls you are planning to rely on NOT all the controls, that's another reason you don't give an opinion because it will imply that you tested ALL the controls.

In other cases, a NON issuer might ask you as auditor to test the controls with the financials, in that case you will have to test the controls, you will remove that statement “but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control” from the audit report.

For Issuer, You test controls with the financials, it is a MUST (SOX 404) and the report looks totally different and has opinion on both financials and controls

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

[pharaoh]

@CPAWarrior – When you have a change in principle you can add an explanatory paragraph to Review or Compilation. This is considered a modification to the regular report

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

[Author]

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