[famh110]

Hello! I was doing a SIM earlier today that asked to solve for Days Outstanding in AR and I totally blanked out. Is there a way to look formulas up in the AL. If so, please guide me.

Thanks so much. Have a great day!

[Anonymous]

Nope, gotta know it:)

[famh110]

thanks so much for replying anyatver!! i am taking audit next week so really nervous. you did so well, can share your strategy for passing audit?

[Still Drowning]

for formulas like days outstanding, all you need to know is the turnover version of the formula since it is just 365/turnover ratio.

AR turnover = Sale/Avg. Ar
inventory turnover = cogs/avg. inventory
asset turnover = sales/ avg. total assets

what helped me get these down is think of the name of the formula (AR, inventory, assets), and always put the avg. of that particular asset in the denominator

The numerator will be the Income statement account that closely relates to it (AR and Sales, COGS and Inven, and Assets is just weird with sales lol)

Overall the best way to pass is just grind out multiple choice, but make sure you understand why you got things wrong. I can't stress quality over quantity enough. I only completed about 75% of all questions in my review course (probably about 800 questions attempted).

Auditing essentially is being able to identify the assertions and performing tests to ensure management is actually true to what they are asserting. Ie. Search for unrecorded liabilities test = Designed to test management's assertion of completeness (ensure everything as of year end is recorded and not excluded) etc. etc.

Best of luck!

[Anonymous]

@famh110-for audit, the formulas were actually provided with the SIMS (don't quote me on that in case they changed it). No such luck for BEC-I thought maybe that's the one you are talking about. For Audit, make sure you know your transaction cycles and audit opinions. I deal with audit in my daily job, so that was the easiest section for me to study….

[famh110]

@stilldrowning and @anyatver..thank you so much for taking out the time in helping me. really appreciate it!
i did try to keep the turnover formula in mind like the way u suggested and its working…yay! i am ok on cycles and audit opinions but i do hate assertions. do you straight up memorize the assertions for each of the classes (transaction, balances, or disclosures) or is there some good logic? i get stuck on questions where they give you a procedure and ask what kind of assertions they are testing.

[Anonymous]

@famh110-oh I hated assertions because what they tell you in Becker at least, this test is testing audit in a vacuum, so you can't really apply real life logic to it…I think practice in that area makes perfect. If you are using Ninja, they had some good SIMS on practicing that I believe.

[Recked]

2 tips.
AR Turnover is actually Net CREDIT Sales/Avg AR
Cash sales don' go into AR, so if you use total sales you'll get the wrong answer, but it will be an option.
More often than not they will give you total sales only, but just watch out if they provide sales and break down cash sales vs credit sales.

2nd – Unmodified and Unqualified may be used interchangeably on the exam.
Do NOT disqualify an answer just because it is not in the format you expect it to be.
If the question mentioned PCAOB or non-PCAOB I was looking for the answer to be in a specific format, and likely chose the wrong answer because my thinking was too rigid.

Also remember there will be multiple right answers, and you need to chose the BEST correct one.
Use your test taking skills. Eliminate 2 right off the bat, and then analyze the 2 remaining while trying to think what are they testing for, what are they asking, what are they trying to see that I know.

I have zero audit experience and passed it with 3 weeks. Keep hammering those MCQs. Practice makes perfect.
If you are testing well in an area, invest your time elsewhere, ie: hit the poor performance areas extra hard.

[Still Drowning]

For assertions I basically tried to imagine what management may want to do with their numbers if they were bottom line driven (maximize ratios and profitability)

Example: Accounts Payable -> Management will assert completeness of AP (all of AP for the fiscal year is included and not excluded to make the balance appear smaller)
More AP means lower liquidity and looks less desirable. So in general, management may want to have the AP balance at year end appear lower than what it actually is which is where audit procedures come in to test that management's assertion of completeness

AR -> Management will be asserting that AR at year end is valued properly (allowance may be or may not be adequate) and that there is proper cutoff (all AR/sales are actually for the current fiscal year)
More AR is good since credit sales means debit to AR and credit to Revenue. The result of this will be overstating AR and Sales. So as an auditor, you would perform some type of sales cutoff test.

I am not really great at providing examples, but this is how I would think through certain assertions/accounts. Just take a step back and just think of what greedy management would want to do and then how you as the auditor, will challenge what management says.

There was a mnemonic device that Roger used to help me remember the assertions. I actually found a clip of the video of him explaining his mnemonic which I found helpful -> Tells you how to test each assertion essentially! Below is the link to his video. Best of luck and study hard!

[Author]

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