[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).

[Forem004]

None actually

AU-C 540.A15 states, “The preparation and fair presentation of the financial statements requires management to determine whether a transaction, an event, or a condition gives rise to the need to make an accounting estimate and that all necessary accounting estimates have been recognized, measured, and disclosed in the financial statements in accordance with the applicable financial reporting framework.”

[Forem004]

A company employs three accounts payable clerks and one treasurer. Their responsibilities are as follows:

Employee Responsibility
——– —————————————————–
Clerk 1 Reviews vendor invoices for proper signature approval
Clerk 2 Enters vendor invoices into the accounting system and
verifies payment terms
Clerk 3 Posts entered vendor invoices to the accounts payable
ledger for payment and mails checks
Treasurer Reviews the vendor invoices and signs each check
Which of the following would indicate a weakness in the company's internal control?

A.
Clerk 1 opens all of the incoming mail.

B.
Clerk 2 reconciles the accounts payable ledger with the general ledger monthly.

C.
Clerk 3 mails the checks and remittances after they have been signed.

D.
The treasurer uses a stamp for signing checks.

[pharaoh]

C, that should be the treasurer

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

[Forem004]

Correct!

In an engagement to examine management's discussion and analysis (MD&A), which of the following best defines control risk?

A.
The risk that an assertion within the MD&A will lead to a material misstatement

B.
The risk of detecting misstatements that are material to the MD&A presentation taken as a whole

C.
The risk that the practitioner will not uncover a material misstatement within an MD&A assertion

D.
The risk that material misstatements in the MD&A presentation will not be prevented in a timely manner

[pharaoh]

I think the same as regular control risk, answer D

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

[Anonymous]

D. The risk that material misstatements in the MD&A presentation will not be prevented in a timely manner

[Forem004]

Right again!

A practitioner has been engaged to apply agreed-upon procedures in accordance with Statements on Standards for Attestation Engagements (SSAE) to prospective financial statements. Which of the following conditions must be met for the practitioner to perform the engagement?

A.
The prospective financial statement includes a summary of significant accounting policies.

B.
The practitioner takes responsibility for the sufficiency of the agreed-upon procedures.

C.
The practitioner and specified parties agree upon the procedures to be performed by the practitioner.

D.
The practitioner reports on the criteria to be used in the determination of findings.

[pharaoh]

C?

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

[Forem004]

Yes – another one I didn't completely read when taking the exam! 🙁

A practitioner may perform an agreed-upon procedures attest engagement on prospective financial statements provided the following conditions are met:

The practitioner and the specified parties agree upon the procedures to be performed by the practitioner.
The specified parties take responsibility for the sufficiency of the agreed-upon procedures for their purposes.
The prospective financial statements include a summary of significant assumptions.
Criteria to be used in the determination of findings are agreed upon between the practitioner and the specified parties.
Other conditions as listed in AT 301.52.

[Forem004]

Which of the following statements is correct concerning analytical procedures used in planning an audit engagement?

A.
They often replace the tests of controls that are performed to assess control risk.

B.
They usually use financial and nonfinancial data aggregated at a high level.

C.
They usually involve the comparison of assertions developed by management to ratios calculated by an auditor.

D.
They are often used to develop an auditor's preliminary judgment about materiality.

[pharaoh]

B ..no C ..no B. B final word

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

[Forem004]

Correct! I never remember doing this for the first time, nor reading anything about it!

PCAOB Rule 3522 regarding tax transactions prevent which of the following nonaudit tax services?

A.
Original, or amended, federal returns

B.
Services related to state and local returns

C.
Services related to marketing, planning, or opining in favor of the tax treatment of a transaction

D.
All tax services are prevented by the PCAOB.

[pharaoh]

I know this one because I selected D while it was C. I have no clue what this is

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

[Forem004]

Yeah I didn't bother looking it up. I just know there are some restrictions regarding tax services, so now I know that!

Didn't think before I answered on this one!

According to the standards of the profession, which of the following activities may be required in exercising due care?

A.
Consulting with experts

B.
Obtaining specialty accreditation

C.
Both consulting with experts and obtaining specialty accreditation

D.
Neither consulting with experts nor obtaining specialty accreditation

[Anonymous]

C.Services related to marketing, planning, or opining in favor of the tax treatment of a transaction

[Author]

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