[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

[Sticky Nicky]

cant even see your answer or the correct one,,,but i would have though 2 only,,,i also thought control risk was independant of the audit and cannot be reduced but only assessed…thats why I hate this section,,,way too many conflicting answers across all materials

[GiniC]

@TheblackCPAseeker –

I don't do anything special for sims – I think because I approach the MCQs logically/conceptually, the SIMS just flow the same way. They scare me a little more because I can't know I've narrowed in on the right answer, but (especially in AUD) if you know the concept you can fill in the SIM. I learned by blowing a lot of homework MCQs to really think about the questions.

My son used to tease me about the post-it on my monitor (it says “READ READ READ the question TWICE!!!”) until he realized he had blown several questions on one of his physics mid-terms by missing a single word in the question. Now I hear him muttering it from his desk on the other side of the room.

[GiniC]

@TheblackCPAseeker – on the control risk question

I went back to my Audit text and confirmed it, you remember correctly. Inherent risk and control risk are together referred to as “client risk” or Risk of Material Misstatement. The auditor “has little or no control over” these two, only of detection risk.

I say the answer must be II only – what was the correct answer?

[TheblackCPAseeker]

@Ginic and @Sticky Nicky

The correct answer is actually option 4 Either I or II, or both.

Below is the explanation from Roger after I picked ii only

Incorrect. Audit risk (AR) is a combination of the risk of material misstatement (RMM), which is a combination of inherent risk (IR) and control risk (CR), and detection risk (DR). An increase in IR will increase RMM and, in turn, increase AR. To keep AR at an acceptable level, either RMM must be prevented from increasing by reducing CR to offset the increase in IR, or by reducing DR to offset the increase in RMM. DR is reduced by enhancing the nature, timing, or extent of substantive testing. The only way that CR can be reduced, however, is if the auditor determines that controls that were not being relied upon can be, which requires the performance of tests of controls

FAR - 80 (05/2015)

AUD - 68 (08/2015, Retake (07/03/16)

REG - 77 (11/2015)

BEC - Sometime in 2016

We are destined for this.

[HelloCPA]

@theblackCPAseeker

my guess was II only (detection risk) however I can understand it being either by thinking of it mathematically.

AR = IR x CR x DR

if AR is to remain low and IR increases, then either the acceptability of CR must be lower OR acceptability of DR must be lower to counter the increase of IR.

DR is controllable by the auditor but accepting a low CR as it might appear may be possible too. Im not sure if there helps but try plugging in #'s and thinking mathematically about it?

[Spartans92]

I must confess I did not study as much as I wanted due to this election! It is far too distracting. 🙁
A4 is giving me lots of stress. Happy Election Day everyone.. for those that care about politics like me.. God Bless America and all of us! 🙂

BEC- PASS

[pharaoh]

Same here. I can't stop sneaking at the results, so i decided to take the day off

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

[Spartans92]

Haha right on Pharaoh. I have becker open but I keep catching myself watching the TV instead. Guess Ill take the day off as well and play catch up tomorrow. Seems like we pretty much know what the results will be…very soon! Good Night, friend.

BEC- PASS

[GiniC]

I was doing OK until the polls closed, but then I lost it. I'll have to make up time the next couple of evenings after work!

[Spartans92]

GiniC, Im on the same boat need to play catch up this weekend.

BEC- PASS

[pharaoh]

I took the whole of thanksgiving off to cram, wrap and close all the gaps and weak areas. When are you guys taking the exam?

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

[Spartans92]

During physical inventory count, company included inventory it held on consignment. Question asked what effect this has on adj. entries for inventory turnover and ROE ratio. I tried plugging in numbers but cant seem to get it right. Invt. is Overstated but shouldn't Invt T.O be decreasing? How about ROE? Anyone can help me understand Thanks

BEC- PASS

[Anonymous]

Ok, that question about the audit risk model is tricky.

here's the part of the explanation that stands out to me:

“The only way that CR can be reduced, however, is if the auditor determines that controls that were not being relied upon can be, which requires the performance of tests of controls”

looking through the literature, i found this:

“Reliance on controls that is supported by sufficient and appropriate audit evidence allows the auditor to assess control risk at less than the maximum, which results in a lower assessed risk of material misstatement. In turn, this allows the auditor to modify the nature, timing, and extent of planned substantive procedures.”

https://pcaobus.org/Standards/Auditing/pages/auditing_standard_13.aspx#_ftn12

so basically, the auditor is not changing the control risk, but assessing it at less than maximum by relying on controls. and to do so, he “must obtain evidence that the controls selected for testing are designed effectively and operated effectively during the entire period of reliance”

[Sticky Nicky]

just took audit today,,,overall not too bad,,,def think i passed,,,testlet 1 easy,,,teslet 2 hard,,,testlet 3 hard to tell,,,coulda went back to medium,,,i did really well on the sims though i feel,,,def got the research correct,,,3 of the sims i know i got 100% on unless there was a trick,,,the others i probably got more than half the cells right on each,,,hopin for that 75 on 22nd!

[ahsq]

i hope i did well too. 🙁

[Author]

Replies