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Your talking about the 10 for GAAS i am talking about the 11 from attestation services. A2-50 in becker.
I passed AUD by just doing the MCs only. If u write note while doing the MCs u will be fine.
What M/C did you use?
I did all Becker MCs including suplmental. When u do them read the question carefuly and what it asks. Then read all the answer choices. know why the answer is correct and why is not. Make not while u doing them.
here is my note and I made them from the questions themselves. What I notice was that, for example, in the review questions there are four or five correct answers for all review questions. Even for compilation ur will notice that.
The primary purpose of establishing quality control policies and procedures for deciding whether to accept new clients
Minimize the likelihood of association with clients whose management lacks integrity
Special report: (i.e. report on one account on balance sheet or just on income statement)
If and auditor disclaimed an opinion on financial statement taken as a whole and report just for one account:
• No reference to be made and no reason should be explained.
• No restriction.
• Report on accounts is presented separately from the disclaimer of opinion on the financial statements
If an auditor disclaims or adverse an opinion on financial statements taken as a whole and states the one account is fairly stated, this is not an appropriate reporting because it tends to overshadow the auditor disclaimer or adverse in opinion
• Reporting on comprehensive basis of accounting other than GAAP requires disclosing any reservations in an explanatory paragraph and qualify the opinion if statement is not suitably titled.
An auditor may compile, examine, or apply agreed-upon procedures to limited use prospective financial statements
Review & compilation:
To comply with SSARS, the accountant is required to prepare financial statements(reproducing and making journal entries are not considered preparation of financial statement)
• Modification for review report only when there is a departure from GAAP
• There is no opinion such as adverse or qualified. However, when there is a departure from GAAP the auditor should Disclose the departure from GAAP in a separate paragraph of the accountant’s report
• No restriction of the use of the report.
• Auditors is impaired independent even the interest is immaterial because he provides limited assurance.
• The auditor should understand the accounting principles of the industry in which the entity operates because the auditor will make inquires and analytical procedures.
• An accountant may issue a report on one of the basic financial statements provided that scope of the inquiry and analytical procedures has not been restricted
• If the engagement was changed from Audit to review and there is reasonable justification, there is no need to make reference to the original engagement or scope limitation or any procedures performed
• Disclose the departure from GAAP in a separate paragraph of the report if there is a departure from GAAP
• Before doing review, make sure you have sufficient knowledge of accounting principal the company operates
• First step is Obtaining a general understanding of the entity’s organization, its operating characteristics, and its products or services
• Engagement letter is not required for understanding with client.
• Consists principally of inquiries of company personnel and analytical procedures applied to financial data
• Limited assurance(negative) implicit
• Does not contemplate obtaining corroborating evidential matter or applying certain other procedures ordinarily performed during an audit. implicit
• less in scope than an audit
• The accountant is not aware of any material modifications that should be made to the financial statements to conform with GAAP (limited assurance)
• Exam trick= Provides only limited assurance that the financial statements are fairly presented. This answer is wrong.
• The accountant did not obtain an understanding of the entity’s internal control or assess control risk(implicty)
• An accountant can decline issuing compilation report if the report is not expected to be used by a third party.
• Written representation letter is not required for compilation engagement. While an engagement letter is required. Also, should marked un audited
• Can be used to obtain credit.
• No inquiry
• One of compilation procedures is reading the financial statements to consider whether they are free of obvious mistakes in the application of accounting principles.
• If the basis of accounting is not disclose the accountant should disclose it in the report.
If the financial statement omits all disclosure of GAAP, the accountant should state that financial statement is not designed for those who are uninformed about the omitted disclosures, clearly indicated in the accountant’s report, and not undertaken with the intention of misleading the financial statement users
• If engagement is changed from Audit to completion, an accountant should consider effort to complete the Audit and the reasons of client request. Of those reason is The entity’s principal creditors no longer require the entity to furnish audited financial statements. Note: scope limitation is not considered a reasonable reason.
The accountant does not express an opinion or any other form of assurance on the financial statements (no assurance)
Limited to presenting in the form of financial statements information that is the representation of management
The accountant compiled the financial statements in accordance with Statements on Standards for Accounting and Review Services
Review on interim financial information:
• When review interim financial statement, no inquiry about going concern.
• The objective of a review of interim financial information of a public entity whether Material modifications should be made to conform with generally accepted accounting principles
• Keep in your mind that report on interim is a review.
Letters for underwriters
• Negative assurance (provide negative assurance as to whether any material modifications should be made to the unaudited (condensed) interim financial information in order for it to be in conformity with GAAP)
• Not included in registration statement.
• Addressed to underwrite.
• An opinion as to whether the audited financial statements comply in form with the accounting requirements of the SEC
Decrease in the amount of misstatements in a class of transactions that an auditor could tolerate:
The auditor should perform the planned auditing procedures closer to the balance sheet date
Increase in the extent of auditing procedures
Increase in the amount of misstatements in a class of transactions that an auditor could tolerate:
Apply the planned substantive tests prior to the balance sheet date
Decrease the extent of auditing procedures
Materiality increases =decrease audit risk and decrease substantive procedures
Materiality decreases=increase audit risk and increase substantive procedures (additional)
Could anybody help me about what should I write at the beginning and at the end of the memo or letter I want to gain as much points as possible because “written communication” is my weakest area. I’v heard that If u did well in MCs and Simulations and left the written communication blank you will fail. I am relying on the research to find an answer and the make a brief summary
Follow up on the errors procedure = right & obligation existence.
Credit granting policies, Credit rating, and Credit approval= Valuation & allocation.
Lapping occurs= look at MCs contains “remittance credits”
Review or recomputed amortization related to intangible assets= valuation & allocation.
• When the question says that “ recorded” means asking for “completeness assertion”
• Testing plant and equipment balances by inspecting new additions listed on the analysis of plant and equipment = existence
inspect loan agreements= presentation and disclosure
Tests designed before the end of the year that have been recorded in the subsequent year=cut off
obsolete or slow-moving inventory= valuation & allocation.
n confirming with an outside agent, such as a financial institution, that the agent is holding investment securities in the client’s name= right & obligation+ existence.
Determining that proper amounts of depreciation are expensed=valuation & allocation & accuracy.
An auditor scans a client’s investment records for the period just before and just after the year-end to determine that any transfers between categories of investments have been properly recorded.= Understandability and classification, and valuation and accuracy
Inventory observation test counts are traced to the client’s inventory listing= completeness.
Reviewing the renewal of a note payable shortly after the balance sheet date= understandability & classification. (i.e. current or noncurrent)
analyze inventory turnover rates= valuation & allocation.
no excessive costs for idle plant were charged to inventory=understandability and classification +Valuation and allocation
traced the test counts to the client’s inventory listing= completeness
conformation of account receivable= existence+ right & obligation.
An auditor testing long-term investments would ordinarily use analytical review as the primary audit procedure to ascertain the reasonableness of the =completeness of recorded investment income.
In testing long-term investments= completeness.
Quality control standard is not ok
Just standard of fieldwork is ok
• Retention period:
1. Seven years PACBO, five years auditing standard.
• Documentation completion:
45 days PACBO
60 days Auditing standard.
During overall review stage, the auditor does not perform substantive test. He just make a review for unusual or unexpected account
In addition the analytical procedure in this stage is to see if the additional audit evidence may needed.
(Obtained through observation, examination, inspection, or recalculation)= more reliable evidence.
Note: don’t think that analytical procedure provides reliable evidence. Look at Observation, examination, inspection, or recalculation
• When control risk assessed at low level, the auditor require to perform test of control and limit test.
A small number of accounts receivable are involved but a relatively large number of errors are expected= positive conformation.
When test of details found an errors such as overstatement, the auditor will increase (extent) substantive tests.
just to remind u, u dont need to memorize any report. Do the MCs again and again and again.
Thanks for the helpful tip! I have never done it that way, gives me a new way of doing things which i will look into. Thanks again!