[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

[Anonymous]

I agree with forem004, but I think you would use the current date as the report date for the reissued reports. I believe the reissued reports would have more updated info (possible subsequent event info I guess?).

Spartan, if dr decrease, that means “you allow less detection risk” meaning “your wanting there to be a lesser chance of a detection error” therefore “you will increase sample size”.

I have a conceptual question (I think)…

May an accountant accept an engagement to compile or review the financial statements of a not-for-profit entity if the accountant is unfamiliar with the specialized industry accounting principles, but plans to obtain the required level of knowledge before compiling or reviewing the financial statements?

A. An accountant may accept an engagement to compile the financial statements.

B. An accountant may accept an engagement to review the financial statements.

C. An accountant may accept an engagement to either compile or review the financial statements.

D. An accountant cannot accept an engagement to either compile or review the financial statements.

I got the right answer, c. But this got me thinking, are there any situations where you be reframed from performing an engagement because of your lack of understanding with an industry? I think all engagements (audits, aup, compliance audits, reviews, compilations, government audits, etc) basically allows an accountant to accept the engagement as long as they are willing to seek the necessary skills to perform the task, correct?

I might be thinking too hard with this question but I should the answer ALWAYS be ‘yes'?

[Anonymous]

So only in the reissued reports that the accountant should use the current date, correct? On the other hand, updated and issued reports would still use the prior report date, correct? Thanks folks!

[Anonymous]

@JT, I'd say “YES”.
In addition to your explanation about accepting any engagements when an accountant has no previous experience or unfamiliar with the specialized industry accounting principles, the accountant should obtain sufficient knowledge of the industry by consulting:
1. AICPA guides,
2. Industry publications, or
3. Individuals knowledgeable about the industry

[Anonymous]

Amor,

Thank you for your response.

I am not sure about this answer but I think all of them would have a current date. I couldn't find a specific answer though.

I tried looking it up here. https://www.aicpa.org/Research/Standards/CompilationReview/DownloadableDocuments/AR-00200.pdf

[Forem004]

I have went over a question that did not specifically say “the auditor could not obtain the necessary knowledge” but the answer was obtain the use of a specialist. I believe it was something regarding specific regulatory requirements or compliance. If I come across it again, I will post it.

[YBD215]

Which of the following is not a quality control policy or procedure related to the review of work performed by other engagement team members?

A.
The work performed supports the conclusions reached and is appropriately documented.

B.
Significant conclusions reached on the engagement are discussed with the firm's peer reviewer.

C.
The evidence obtained is sufficient and appropriate to support the report.

D.
The objectives of the engagement procedures have been achieved.

B is the correct answer. While the firm may occasionally consult with its peer reviewer, there is no requirement to discuss all significant conclusions with the peer reviewer on each engagement.

I understand that a peer reviewer is not required, but the question didn't ask which was required. So i was thinking that technically a peer review is still a proceedure that can be used. How can I keep from making mistakes like this during the actuall exam?

[Anonymous]

@JT, thanks for the link. I saved a PDF copy of it. It's 18 pages in all, yay! I am reserving this file for my breakfast tomorrow:)

Thanks also to @Forem.

You guys are all awesome! Those who stay active in the forum to seek answers to their questions and those eager to help those seeking answers have a greater chance of passing than those who stay in the sideline.

[Forem004]

Answering questions helps me just as much, because it either makes me think more about something that I had not considered being relevant or makes me research it, because I never knew the answer. 🙂

@ybd215, your best bet in situations like that is process of elimination.

[Forem004]

These are the instructions for Simulation #38. It says the Why would the prior year's auditor's report need to be reissued even though Land decided not to do so? I assume because of the different engagements, but if it was reissued what would it say? That the engagement was a review, even thought it was an audit, so it could be comparative?

Jordan & Stone, CPAs, audited the financial statements of Tech Co., a nonpublic entity (nonissuer), for the year ended December 31, 20X2, and expressed an unmodified opinion. For the year ended December 31, 20X3, Tech issued comparative financial statements. Jordan & Stone reviewed Tech's 20X3 financial statements, and Kent, an assistant on the engagement, drafted the accountant's review report, which follows. Land, the engagement supervisor, decided not to reissue the prior year's auditor's report, but instructed Kent to follow SSARS guidance and include a separate paragraph in the current year's review report describing the responsibility assumed for the prior year's audited financial statements.

Land reviewed Kent's draft and indicated in the supervisor's review notes that there were several deficiencies in Kent's draft.

[GiniC]

@YBD215 –

When I read the choices, I felt that all options were quality control policies or procedures too. The key to this one (I think) is in the wording – “…other engagement team member…”. The peer reviewer, when used, is not part of the engagement team – in order to be an independent peer reviewer, they can have no involvement or connection to the original audit.

This is my third section and whenever it seems like all the answers are correct (or incorrect) there is something in the wording of the question that “tips” the selection.

[GiniC]

@Forem004 –

So the Simulation is asking for reasons that the prior (audit) report would HAVE to be reissued, by the same CPA doing a review in the following year, even though the CPA had chosen not to reissue?

According to my current Becker materials, when there is a downgrade in service from audited (prior year) to unaudited (current year) the CPA has the choice to
(a) reissue the audit report OR
(b) include an otner-matter paragraph in the current report indicating the date and service of the prior period report, the opinion expressed, and that no auditing procedures were performed
since the previous report date. (I would assume this paragraph would also indicate that the CPA does not take auditing-level responsibility for the reviewed statements.)

AR 00200.29 says the exact same thing. The only reason I can think of that the audited report would HAVE to be reissued would be if something was found during the review process that would make the opinion in the prior-year report no longer appropriate, such as subsequent events not previously known?

[Anonymous]

@Forem, I checked out Sim#38 of NINJA MCQ. Dang, we really have to memorize all these different types of audit reports!
Per my notes:
Reporting When One period is Audited and other is either Compiled or Reviewed
·The unaudited FS should be clearly marked and the accountant should either:
1. Reissue the PY report, OR
2. Include an OMP in the CY report describing the responsibility assumed for the PY statements

In the illustration, the CPA decided not to reissue the PY report and I didn't see that they were precluded from doing so.

[GiniC]

Can anyone help me with the thought process for this? I do accept that any restrictions on RE must be disclosed – but what does that have to do with classification or understandability? When I read the question my immediate thought was “Rights and Obligations”, as any covenants or requirements related to earnings and dividends would have to do with the entity's rights to use the earnings at their own discretion, or their obligation to hold some stated amount in reserve. I was at a loss with the choices given.

During an audit of an entity's stockholders' equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify management's assertions related to:
a. Classification and understandability.
b. Completeness.
c. Existence.
d. Valuation and allocation.
Explanation
Choice “a” is correct. Restrictions on retained earnings are for contractual or legal appropriation of retained earnings. The purpose is to restrict dividends, and such restrictions
should be disclosed in the financial statements.
Choice “c” is incorrect. Restrictions on retained earnings have no effect on the existence of retained earnings.
Choice “b” is incorrect. Completeness refers to the inclusion of all transactions and balances. Restrictions on retained earnings will not affect completeness.
Choice “d” is incorrect. Assertions about valuation and allocation deal with whether assets, liabilities, and equity interests have been included in the financial statements at
appropriate amounts. Restrictions on retained earnings do not affect valuation and allocation.

[Anonymous]

GiniC

I think this is more of a disclosure with equity and I think the most common assertion with disclosures are “classification and understandability”

[Anonymous]

Ive been having issues accessing the AL site/page.

Ive tried this a few times now using this site but have never received any e-mail confirmation about my access to the AL site.

Am I doing this right? Im using the links below and I am filling out my information and the response I receive back tells me “you will receive an email once we confirmed your information”. But no e-mail ever comes through.

https://www.aicpa.org/BecomeACPA/CPAExam/ForCandidates/HowToPrepare/Pages/literature.aspx

https://proflit.nasba.org/

[Author]

Replies