[SoCalCPA]

I am having a lot of trouble on the transaction cycles section of Audit. There are 121 questions in the Becker for that, and I really struggled! For example, here is a sample question…

Q1) To gain assurance that all inventory items in a client’s inventory listing schedule are valid, and auditor most likely would trace

Answer: C – Items listed in the inventory-listing schedule to inventory tags and the audition’s recorded count sheets.

After solving countless number of questions like this, I still do not fully understand how this verifies the validity (existence) of the items. Does anybody have a good method of solving questions like this? (Vouch down, vs. Trace up does help a bit, but not much). Thanks!

—

If someone could clarify this question as well, that would be much appreciated… (After about 200 + mcs today, everything looks the same… sigh ahah)

Q2) In performing a search for unrecorded retirements of fixed assets, an auditor most likely would:

A- Inspect the property ledger and the insurance and tax records, and then tour the client’s facilities (correct answer)

B- Tour the client’s facilities, and then inspect the property ledger and the insurance and tax records (looks like a subtle difference, but this is testing the completeness)

I can’t really understand the difference between answer A & B, even after looking at Becker explanations. Any thoughts on this Q? Thanks again!

B - (4/2012)
A - (5/2012)
R - (1/2012) Done!
F - (10/2011) Done!

[Anonymous]

For the second question, you have know what you are searching for (search for urecordend retirements of fixed assets) by first inspecting the property ledger and insurance records, etc and then tour the facilities not the other way around because you wouldn't know what to look for.

[Anonymous]

Ok sounds like you're trying to tell the difference between existence and completeness. For existence, you pick from the list / detail and determine if it exists. For completeness, you pick from another source (not the list / detail) and determine if it's properly included / excluded from the list / detail. The first question you copy / pasted is an example of existence: they picked from the list and then checked that there was an inventory tag / item was counted, so the item selected from the list “exists”. The second question is a bit tricky. If there are unrecorded disposals of fixed assets, that pretty much means you have assets recorded that do not exist because they've actually been disposed of (but disposal was not recorded). So again, this is a test of existence. Pick from the fixed asset list and ask to see the actual fixed asset. If you can find the asset, it has not been disposed of, so everything is ok. If you cannot find the physical asset, that means you have an unrecorded disposal since it's still on the list, but doesn't actually exist. Choice B would not test for unrecorded retirements because by touring the warehouse and picking an asset that is in the warehouse, you would never end up picking an asset that has been disposed since it wouldn't even be there for you to pick.

[SoCalCPA]

Wow I believe these types of questions are simple, and it does seem so after reading your explanation, but I think I will need a lot of practice with this. Concept is still hazy.

Thanks for the help!

B - (4/2012)
A - (5/2012)
R - (1/2012) Done!
F - (10/2011) Done!

[KasiaS]

This may sound silly but I used TV networks to remember existence vs completeness:

CBS – Completeness Begin with Source – if you're looking to prove that say, an asset is recorded properly, you start with a source document like the packing slip or invoice and trace it to the purchases journal or G/L. Here, you know the asset exists and the question you're answering is if it “exists” on the books as well.

E! – Existence End – Here you're doing the reverse. You see the asset on the books and you're looking to prove it exists in reality so you start with the “end” meaning the G/L or journal and work to the “beginning” source docs.

This alone helped me nail tons of MCQs on this topic. I hope you find this helpful.

FAR 88 (07/15/11)
BEC 83 (08/31/11)
AUD 81 (10/15/11)
REG 83 (11/26/11)

Used NIU Correspondence CPA Review

[SoCalCPA]

haha KasiaS, I won't forget your acrynoms, CBS vs. E! lol, made me smile & laugh during this miserable time, thanks!

Now, I'm close to 100% sure that I understand the logic. Trace up vs. Vouch down is a concept that seems easy enough. But for some reason, many questions on this topic just seem vague and so the answers seem similar, unfortunately. I hope that going through the questions for the second time will make things real quick for me.

Finishing A5 tonight, then 1 week till test date! Good luck everyone!

B - (4/2012)
A - (5/2012)
R - (1/2012) Done!
F - (10/2011) Done!

[KasiaS]

I'm glad you liked it! I find that the more ridiculous the associations that I make, the better I remember them. It's worked for me so far but it's getting hard to come up with fun stuff for REG. Just 3 more weeks! I gave in and bought Jeff's NINJA Notes to help me with this beast.

FAR 88 (07/15/11)
BEC 83 (08/31/11)
AUD 81 (10/15/11)
REG 83 (11/26/11)

Used NIU Correspondence CPA Review

[jimboace88]

Not that this helps with your question, but I just wanted to add that A4 and A5 are pretty much as hard as AUD gets, but you will probably find that after constant, obsessive repetition they too will seem simple to you. There is a light at the end of the tunnel 🙂

FAR 07/27/11 - 87
AUD 10/01/11 - 85
BEC 11/15/11 - 87
REG 01/03/12 - 92

[yankeeaccountant]

BINGO!

Big help. I muddled thru some mcq's last night.

Thanks for this great post!

[Anonymous]

Another question that is creating lot of confusion between existence and completeness – When the auditor has to check for unrecorded liabilites, he looks at the cash disbursements made subsequent to year end and goes back to the purchase orders, receiving reports and invoices. Isn't this tracing (thereby checking for existence) rather than completeness?

[Author]

Replies