[krgraham]

I think I have a fundamental audit problem that I am not understanding. I have failed audit 3 times now and passed the other three on my first. 2 of the times I failed audit I had a part 2 question that was basically the same and it was a pretty big questions (30 fill in boxes).

Without getting too in detail of the questions because I know that is not allowed it basically had to do with 10 different scenarios and how that effects the control, inherent, and detection risk. What I’m not sure of is if in all of those 10 scenarios the control risk or the inherent risk goes up, does the detection risk ALWAYS react inversely?

Just throwing an example out there, say a company upgrades its personnel to all CPA’s from 1st year college students which would in return cause your inherent risk to drop because there is less risk of human error/judgment, does this in return mean that your detection risk would then increase all the time? Why wouldn’t the company just accept the lesser audit risk by the inherent risk dropping? Is the GOAL to keep the audit risk the same? This is a topic I don’t feel Becker hammers out enough and if I get the same question again this time around I think ill get it wrong again.

I appreciate all and any input, thank you in advance!

[Anonymous]

I would assume that there is a target audit risk and that target audit risk hasn't changed.

So if AR is the same, and RMM and its components (IR and CR) go up, then DR has to go down. So yeah, inversely related.

Why not just accept the lower AR? Why not just get a “freebie”? Because that lower AR ain't free.

You're spending more money keeping DR the same (more test of details, more hours, more experienced staff, etc). PLUS, you're spending more resources on DR than you need to, for a level of AR you don't need. You're getting way too much assurance than you need, and you're spending more money than you need to.

And if you're spending more money, that means you're CHARGING the client more money than you need to. Which will make your audit firm uncompetitive.

tl;dr you would want to raise DR for better efficiency.

[Mary 2496]

I had the exact “thing” you're talking about and can still picture it. Also, for the record, I took audit three times before I passed it. I have to run into a meeting and can't go into detail about the question you asked. I will ask – do you use Becker? The reason is because the AUD final review (not the regular Becker) has a simulation in it that is almost identical to the exam “thing” you are talking about with complete and easily understandable explanations for each category and scenario. 😉

[Mrsterrell]

I am in the same situation where I have taken audit multiple times and the simulations kill me each time. I am going to get the AUD final review to see if this can make a difference in my next AUD attempt.

[On2Sum]

I think you need to go back and get a handle on INHERENT RISKS. I believe once you understand that certain risks are beyond the influence of the auditor. You'll be able to knock those type of questions out of the park.

THINK. THINK. THINK.

Let's suppose a company has a board of directors who are not doing their jobs, the auditor will assess the effect of this on financial reporting and design audit programs to catch potential effects of this lack of oversight.

Let's further introduce a board that has an appetite for complex, high-risk derivative financial instruments. These kind of situation exposes the company to certain risks that the auditor can't do anything about.

You Watch/listen to your becker tapes again. I think Tim Gearty did a great job on that part.

FAR - 79
REG - 76
AUD - 94
BEC - 77

DONE! DONE!! DONE!!!

"Success is not final, failure is not fatal; it is the courage to continue that counts"
-Winston Churchill

[krgraham]

Thank you all for the input. @mary 2496, it completed crossed my mind that there's a Final Review option for Becker. I will definitely look into it.

Does anyone have any input on the 2500 MC and 81 Part 2's this website has to offer for $50? Once you purchase it is it accessible or is it physical and therefore shipped in the mail? Thanks again everyone.

[krgraham00]

BUMP*

Alright, I purchased the audit final review for this example. The simulation that mary 2496 is referring to has 9 different scenarios and the question asks to identify the risk component (IR CR or DR) “most directly affected by the scenario” and then tell if that specific component increases. Let me give you an example…

“The entity keeps a large portion of cash on hand.” ANSWER: Inherent risk and Increases

Now, from my experience on the CPA exam they would give that question and then have 3 separate columns.

Inherent risk Control risk and Detection Risk and under each you would have to say Increase/Decrease/No Change

If this example was given in that format, would detection risk then also decrease?????

Thank you ALL for the help!!!!

[WelpCPA2014]

Bump to see if Jeff knows of a similar SIM in Ninja MCQ.

B-79
A-79
R-76
F-77

FINALLY DONE!!!!!

[WelpCPA2014]

Ok I think I found one. SIM #10 if anyone else is interested.

B-79
A-79
R-76
F-77

FINALLY DONE!!!!!

[Author]

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