[OneStepAwayCPA]

Dunn CPA is auditing F/S of Taft Co. Taft uses QSC to process its payroll. Price CPA is expressing an opinion on a description of the controls placed in operation at QSC regarding the processing of its customers’ payroll transactions. Dunn expects to consider the effects of Price’s report on Taft engagement. Price’s report should contain a(an):

a) description of scope & nature of Price’s procedures

b) opinion on the operating effectiveness of QSC’s internal controls.

answer is A but why not B? Price is “expressing an opinion” on the controls, so therefore it should be B right?

Another problem:

PDC processes payroll transactions for a retailer. Cook CPA is engaged to express an opinion on a description of PDC’s internal controls. These controls are relevant to the retailer’s internal control, so Cook’s report may be useful in providing the retailer’s independent auditor with information necessary to plan a F/S audit. Cook’s report should:

a) contain disclaimer of operating effectiveness of PDC’s controls

b) state whether PDC’s controls were suitably designed to achieve retailers objectives

c) identify controls relevant to specific F/S assertions

ans is A. but why? it saids “Cook engaged to express an opinion on internal controls”.

Or my question is WHEN would the answer be YES Express Opinion on Internal Controls??

[Anonymous]

“Price CPA is expressing an opinion on a DESCRIPTION of the controls placed”

B is incorrect because it's an opinion on the EFFECTIVENESS…

“Cook CPA is engaged to express an opinion on a DESCRIPTION of PDC's internal controls”

B) shouldn't be done because it's an assertion and that's a different type of report

C) Cook should identify relevant controls but an auditor doesn't put that in the report.

This leaves you with A, a disclaimer on the effectiveness of the controls.

[OneStepAwayCPA]

so the keyword is “description” when to look for in these problems? If it asks for specifically “opinion on effectiveness” then yes its an opinion on effectiveness?

[Anonymous]

Many questions hinge on ONE word in the question or even in the answer.

As for it being the “opinion on effectiveness” the answers for the first question would have to change because then there would be two correct answers. An auditor will also write out the scope and nature of the procedures done in the audit report (Scope paragraph).

The second question answer list would have to change to be more generic about an opinion. It's a tad tricky to say yes to your question because quite a few of the questions have to do with the multiple choice answers.

[kb24]

Disoriented is right about the correct answer often hinging on one word. People often say FAR is an inch deep and a mile wide. AUD is just the opposite; it doesn't cover nearly as much material, but you are expected to know what is covered in excruciating detail.

The questions you asked about are examples of two types that are prevalent on AUD. The first is one that tests your knowledge of subtle differences between two different types of reports, situations, etc. (in this case Type 1 and Type 2 reports about service organization controls). Often, one word in the question or answers is the key to the correct answer. The second type is one where the obvious answer when you read the question isn't one of the choices or none of the answers appears to be correct at first glance. For these, you have to read the answers and eliminate the ones that are completely incorrect. In this case, the obvious answer would be “express an opinion about management's assertion”, but that's not one of the choices. Answers b and c are wrong because they are specific to the retailer so that leaves a. It's not worded in terms that you would normally think of, but it is correct or potentially so since the question is asking about an opinion on the description of IC and the answer is a disclaimer about the effectiveness.

FAR 4/1/11 - 89
AUD 4/15/11 - 85
REG 4/29/11 - 80
BEC 5/13/11 - 85

[Author]

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