[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

[GiniC]

I keep seeing “substance over form” in MCQs relating to internal controls, but I can't find anything explaining what is meant by “substance” and “form”. Anybody have those definitions/explanations?

[Anonymous]

Can you give an example?

I think it has more to do with ‘the actual theory or reason' behind something and not the actual ‘action'.

[GiniC]

@JT-Frisco city –

I went through the last three sets of questions and can't find any of them – the “substance over form” must have appeared in the explanations rather than the questions, and in Becker I can't see the explanations when I go back to review homework questions. What I've found online about it says

“Substance over Form: Controls may appear to be well-designed and still lack substance”

I recall the correct answer to the question having something to do with the control being well designed but there was no guarantee it would be effective/implemented. I just can't find anything to explain what they mean by “substance” vs. “form”. The definitions of those two words in my head don't make sense in this context.

[Forem004]

I'm having a hard time deciding between assertions each test supports. When we do audit work, I don't have to specifically document which assertion for each test, so I'm confusing them. Any ideas?

[Forem004]

I'm not good at explaining things, so I copied this from a website….Substance over form is an accounting concept which means that the economic substance of transactions and events must be recorded in the financial statements rather than just their legal form in order to present a true and fair view of the affairs of the entity.
Substance over form concept entails the use of judgment on the part of the preparers of the financial statements in order for them to derive the business sense from the transactions and events and to present them in a manner that best reflects their true essence. Whereas legal aspects of transactions and events are of great importance, they may have to be disregarded at times in order to provide more useful and relevant information to the users of financial statements.
– See more at: https://accounting-simplified.com/financial/concepts-and-principles/substance-over-form.html#sthash.aM5smtzo.dpuf

[Anonymous]

@forem004

I know this is bad practice, but I noticed that for the most part, anything having to do with confirmations are usually rights and obligations and existence, and anything having to do with ‘checking credit' are valuation and allocation.

Those 2 usually give me the most trouble, but everything else seems to be pretty understandable to me.

I don't think these assertions are ever explicitly stated. I think management implies all of them through there f/s rep letter and the auditor decides how to test their claim that the f/s are ‘presented fairly’ by testing what ‘fairly’ means,… and from there the auditor does the testing. I think essentially all of the assertions are implicitly stated and the auditor decides which test are more important to test-relative to the specific entity.

that's just my opinion.

[Forem004]

I added a page for each assertion to my notes and I'm listing each test given in a question.

Confirmations can also be completeness and presentation or disclosure.

We need a fill in the blank to explain our answers bc so many tests can satisfy multiple assertions.

[Anonymous]

I reviewed my material a few days ago and I noted one very important point that is not emphasized enough.

For all of the assertions, any test can be used for any assertion and vice versa, any assertion can be used for any test. It’s not cut and dry at ALL!!!.. So for common existence/completion test, given the situation, it can actually be a cutoff assertion, or a presentation assertion.

What you and me are discussing are the ‘general’ relationships between test and the assertions, but by no means if this a cut and dry answer for every situation.

[Forem004]

I know. That's why I'm trying to have all possible scenarios related to each assertion possible so I can eliminate any on multiple choice questions on the exam.

[OdellBj]

I'm studying for audit using Becker and I am currently stumped on transaction cycles (A4). Can anyone please provide any suggestions or resources that might be helpful to better grasp this concept ? Thank you.

[Forem004]

AT 601.07 says a practitioner should not accept an engagement to perform a review of an entity's compliance or about the effectiveness of an entity's internal control over compliance. I skimmed over that regulation. Does anyone know off hand why they should not perform a review, but can do AUP or compilation?

[Anonymous]

@forem004

I just read it and it referenced AT 101.55.

What I can make of it is that reviews only provide a ‘moderate level of assurance' which is probably not acceptable (?) for the compliance audits.

[Forem004]

@odellbj, What are you not understanding about them?

[OdellBj]

@Forem004 Thank you for your response. It just seems very broad to me and it doesn't make much sense. I tend to be a more mathematical person so I'm having trouble grasping the contents and applying to questions. I haven't done many questions on it yet but everyone seems to agree that the best way to tackle that section is doing numerous MCQ so I'm going to attempt that.

[Forem004]

I have an old becker book and it does not have any questions specifically about transaction cycles in that chapter. I can't remember any ninja questions that are specific either, but I've been in public accounting for almost five years, so the questions may have been related without me realizing it.

[Author]

Replies