[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).

[pharaoh]

A?

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

[pharaoh]

The audit program usually cannot be finalized until the:

A.consideration of the entity's internal control has been completed.

B.engagement letter has been signed by the auditor and the client.

C.material weaknesses have been communicated to the audit committee of the board of directors.

D.search for unrecorded liabilities has been performed and documented.

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

[Anonymous]

B.engagement letter has been signed by the auditor and the client

[pharaoh]

That's exactly what I thought. It is A. It is asking about the audit program not the whole engagement and here is the explanation

The audit program usually cannot be finalized until the consideration of the entity's internal control has been completed. An audit program should reflect the results of planning considerations and procedures. To reflect those results, such considerations must be complete. In planning the audit, the CPA should consider the anticipated reliance on internal control.

The engagement letter, communicating material weaknesses, and searching for unrecorded liabilities are all necessary to finalize the audit report.

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

[Forem004]

I am getting off here and relaxing the rest of the night. But I am going to post my last few questions that I got wrong on the last practice exam. So give them a shot and I'll refresh myself in the morning!

[Anonymous]

Thank you for the explanation. I am doing poorer today answering MCQs in A3, averaging 65%. I haven't seen A4 & A5 yet. Reading the book and writing notes is taking me forever!

My MS Word notes are now 83 pages for 4 chapters only. Oh dear!

[Forem004]

you were right on my last question pharaoh. Yours was a good one. I'm glad I read that one!

[Forem004]

In a probability-proportional-to-size sample with a sampling interval of $5,000, an auditor discovered that a selected account receivable with a recorded amount of $10,000 had an audit amount of $8,000. If this were the only error discovered by the auditor, the projected error of this sample would be:

A.
$1,000

B.
$2,000.

C.
$4,000.

D.
$5,000.

[Forem004]

The wording tricked me on this one!

Section 404 of the Sarbanes-Oxley Act of 2002 requires each annual report of an issuer to include which of the following?

A.
Representations from the company's external auditors that the company has effective internal control over operations

B.
Management representations that the company's external auditors have examined its internal control over compliance with laws and regulations

C.
Reasonable assurances that fraud will be identified before the issuance of the company's annual report

D.
Management's assessment of the effectiveness of internal control over financial reporting

[Forem004]

I have no idea why i got this one wrong!

Which of the following statements correctly defines the term “reasonable assurance”?

A.
A substantial level of assurance to allow an auditor to detect a material misstatement

B.
A significant level of assurance to allow an auditor to detect a material misstatement

C.
An absolute level of assurance to allow an auditor to detect a material misstatement

D.
A high, but not absolute, level of assurance to allow an auditor to detect a material misstatement

[Anonymous]

@Forem, please post the explanation/answer for this question you posted earlier. Thanks!
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.

[Forem004]

@armor, The explanation says exactly that. PCAOB Rule 3522 regarding tax transactions prevent….related to marketing, planning…

[Forem004]

I'm more confident on this section than I've been and while most of that is from my experience, that makes me very nervous!

[GiniC]

I went and looked up the rule for the question below (sorry guys, I get up early so I went to bed last night!)

The correct answer is C – summarized, the firm is not independent if any member or affiliate recommends opines etc. on a tax transaction that is confidential or whose principal purpose is tax avoidance, during the period of the audit.
~~~~~~~~~~~~~~~~~~~~~~~~~
Forem004 wrote:

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.

[GiniC]

@Forem004 – if you are still home, you've got this! Go get 'em for all of us!

For the ones Forem004 posted last night:

I'm sure the one on PPS sampling is B 2000 (I had that one in my Becker MCQs and got it wrong the first time)

The SOX question – only Accelerated Filers are required to have the auditor report since Dodd Frank, so I say D – Management's assertion regarding effectiveness of internal control

Reasonable Assurance – D High but not absolute

[Author]

Replies