[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).

[Anonymous]

Thanks, Pharaoh. I got how the test of details is the same as substantive tests. Are these substantive tests the same or any different compared to substantive analytical procedures?

With regards to the last question you posted, is the best answer A? When I googled Section 402, I could see how tricky this question could be. I could spot what's wrong with only Letter B. It's just required by the commission (SEC), not SOX. However, letters C and D seem to be also correct. I don't know!

[Forem004]

402 – credit
403 – beneficial owner
404 – internal control
406 – senior financial officer

This is how I remember it. Does this help?

[pharaoh]

Analytical Procedures are REQUIRED for Planning and Review
It MIGHT be used as a substantive test and I think that's what they mean by substantive analytical procedures.

For my question, yes it is A

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

[Anonymous]

Pharaoh, can you post the explanation of the answer for that question?

[pharaoh]

Here is the answer below and actually has the other SOX sections that Forem summarized above in few words 🙂

Section 402 of Title IV of the Sarbanes-Oxley Act (SOX) dictates that it is unlawful for any issuer to extend or maintain credit in the form of a personal loan to or for any director or executive officer of that issuer.

Section 403 requires disclosures from a person who is directly or indirectly a beneficial owner of more than 10% of any class of any security registered pursuant to Section 12 of the Securities Exchange Act of 1934.

Section 404 requires that an internal control report be filed with each annual report. Management must acknowledge responsibility for establishing and maintaining adequate internal control.

Section 406 requires disclosure of whether or not the issuer had adopted a code of ethics for senior financial officers (and if not, why not). Any change in or waiver of this code requires disclosure as well.

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

[Anonymous]

So all the statements are correct except for the section numbers? Are we supposed to know the specific section number and title/category? There are 1,107 sections in total. This is supposed to be a board exam not a bar exam, LOL.

[pharaoh]

Picked the right answer even though I wasn't convinced

Which of the following representations does an accountant make implicitly when issuing the standard report for the compilation of a nonissuer's financial statements?

A.The accountant is independent with respect to the entity.

B.The financial statements have not been audited.

C.A compilation consists principally of inquiries and analytical procedures.

D.The accountant does not express any assurance on the financial statements.

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

[Anonymous]

Answer is A.

[pharaoh]

Why? Isn't the header of the report “Independent Accountant's compilation report”? and when not independent the word is removed, isn't that considered explicit?

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

[GiniC]

@Pharoah –

They emphasized in my live review – the auditor DOES NOT PERFORM INVENTORY – we observe the client's team counting inventory, and sometimes perform test counts of selected sub-groups to compare to the counts completed by the client. It's about balancing efficiency with strength of evidence, and management retaining responsibility.

[Forem004]

The header for a compilation does not include the word independent anymore.

[pharaoh]

@GiniC – Yes. You are right. The point I was trying to make that you see the count with your own eyes which is a more persuasive evidence.

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

[Forem004]

601Compilation Reports 2

601.1 SSARS No. 21 (AR-C 80.17) requires a written report on a compiled financial statements to—
a. Include a statement that the management is responsible for the financial statements.
b. Identify the financial statements that have been compiled.
c. Identify the entity whose financial statements have been compiled.
d. Specify the date or period covered by each financial statement.
e. Include a statement that the accountant performed the compilation engagement in accordance with SSARS issued by the Accounting and Review Services Committee of the AICPA.
f. Include a statement that the accountant has not audited or reviewed the financial statements, nor was required to perform any procedures to verify the accuracy or completeness of the information provided by management and, accordingly, does not express an opinion, a conclusion, or any assurance on the financial statements.
g. Include the signature of the accounting firm or the accountant.
h. Include the city and state where the accountant practices.
i. Include the date of the compilation report. The date of the accountant's report should be the date of the completion of the compilation procedures.
601.2 The report should not refer to any other procedures that the accountant may have performed. To do so might lead the reader of the financial statements to conclude that the accountant is, in fact, offering some form of assurance. Appendixes 6A-1 and 6A-3 provide illustrations of the standard compilation report under SSARS No. 21.

[pharaoh]

Oh Crap!! It doesn't?? Roger has it in the book and lecture that the word is removed if not independent and might add a paragraph if would like to explain the reason

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

[Forem004]

I assumed that was something that had been in place long enough to be tested. I'll look into it and get back to you. They may still test based on the old regulations.

[Author]

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