[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

[Spartans92]

yea JT I went over the questions by chapter. I first read the section then did those questions. Took me about 3 weeks got sidetracked on few weekends due to family stuff. But I'm looking forward to pounding out the ninja MCQ lol. Best part is no more reading they take me forever.

Good Luck to you!

BEC- PASS

[Forem004]

A simulation says which choice BEST describes the assertion involved when the auditor is concerned about overstatement or understatement of revenues?

But the answer is all of the answer choices are correct.

In what world is “all” the best choice??

[JT]

I see where you're coming from.

Its contradictory for them to ask “THE BEST ANSWER” but then have the answer as “ALL OF THE ABOVE” because you cannot have multiple “BEST” answers.

REG-80-1X
BEC-80-1X
FAR-73-1X
FAR-75-2X
AUD-September 2016

[Spartans92]

Just started Ninja and was wondering if anyone can point out what category is Sampling and Audit procedure on transaction cycle under? I couldn't find it in the custom or the name of those didn't quite showed up. Thanks guys

BEC- PASS

[pharaoh]

Sampling is in 3-B-6
I can't tell exactly where the cycles would be, I think they are spread in section 3-B

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

[Spartans92]

Thanks Pharaoh!

BEC- PASS

[Spartans92]

Which of the following is not ordinarily an example of a departure from generally accepted accounting principles?

Incorrect A.
Presentation of land at appraised value rather than cost

B.
Omission of a disclosure regarding advertising costs

C.
Omission of the statement(s) of cash flows

D.
Adoption of an accounting method for which the entity does not have reasonable justification

Can anyone simplify this for me or explain it in an easier manner? I originally thought the question was asking which is not considered a departure from GAAP. I thought well Land should be valued at FV and not at cost. Hence, its all good not a departure. But the answer is B. Basically it said omitting advertising cost is immaterial,therefore, its not considered to be a departure from GAAP.

BEC- PASS

[pharaoh]

Land and Fixed Assets generally are valued at cost. Think about how you are going to depreciate an asset if its value keeps changing to the market value

As a user who wants to invest in that company, if you are missing the cash flow statement, it can affect your decision but missing a disclosure about advertising cost will not a difference for you

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

[GiniC]

@Spartans92 –

It's always in the details – B is not omission of the advertising cost – it is omission of a disclosure regarding an advertising cost. Omitting the entirety of advertising expenses could be material, change net income, and influence decisions of users. However, omission of a disclosure would be far less critical – the only disclosures in the guidance are
– the accounting policy used (expensed as incurred, or upon first publication),
– description of any direct-response ads capitalized, and
– the amount charged as advertising expense (presumably because most financial statements wouldn't show the details of “operating expenses” on the face of the sheet)

Does that help? I'm always missing a detail like that…

[JT]

Hey guys.

Im working this sim which is basically a drop-down menu and ran into some issues understanding the answer. I would appreciate it if someone explained it better.

Question/scenario: Accounts receivable may be understated because write-offs of accounts receivable could be approved for accounts that are, in fact, collectible; or accounts receivable may be overstated because write-offs of accounts receivable might not be recorded for accounts that are uncollectible.

Answer/reason why the scenario happened to the business: The employees who approve credit also approve write-offs of uncollectible accounts.

The reasoning is this: In both cases of misstatements, the employees who approve credit have the opportunity to write off collectible accounts or to fail to make write-offs of accounts that are uncollectible because they both approve credit and make write-offs. This condition is an example of an inadequate segregation of duties.

I thought the correct answer was: Uncollectible accounts are not determined on the basis of established criteria.

Looking at the scenario, I don’t know why anyone would purposely write off an account that is possibly collectible, even if they had the ability to approve them for credit. I don’t see any significance in the fact that someone is able to approve credit and able to write it off (unless they would be trying to pocket cash payments which is not included in the question).

REG-80-1X
BEC-80-1X
FAR-73-1X
FAR-75-2X
AUD-September 2016

[pharaoh]

I feel that I am missing something, is the question asking about the weaknesses in internal controls?

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

[JT]

My bad….. This is the question stem,…

“The following exercise presents a list of potential misstatements that could occur and not be prevented or detected by Parktown's internal control over the cash receipts and billing function. For each item, select the significant deficiency that could cause the misstatement.”

Its ninja sim #33

REG-80-1X
BEC-80-1X
FAR-73-1X
FAR-75-2X
AUD-September 2016

[pharaoh]

So back to your point, yes when someone approves the credit, he is not supposed to approve the write off. As you said, the check can come in, he would cash it and then writes off the AR. Does that answer your question?

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

[JT]

I guess I knew the answer all along. Thanks for explain it Pharaoh. I think the answer to the sim should've referenced the fact that cash is received and cash can be manipulated (or stolen).

So “Accounts receivable may be understated because write-offs of accounts receivable could be approved for accounts that are, in fact, collectible” this happens when the employee receives cash and keeps it while also writing off the A/R.

When does this happen “accounts receivable may be overstated because write-offs of accounts receivable might not be recorded for accounts that are uncollectible”? I don’t see why the employee would allow this to happen.

REG-80-1X
BEC-80-1X
FAR-73-1X
FAR-75-2X
AUD-September 2016

[Forem004]

I believe it's saying the segregation because the employee is approving credit for customers who should not be extended credit. Then they either intentionally fail to write it off for the customers' sake or the employee does not realize it should be written off.

[Author]

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