[jeff]

NINJA Study Notes, Flashcards, and Audio: https://www.another71.com/products-page/

Wiley Software: https://www.another71.com/wiley-cpa-software/

AUD - 79
BEC - 80
FAR - 76
REG - 92

Jeff Elliott, CPA (KS)
NINJA CPA | NINJA CMA | NINJA CPE | Another71

[gottagetmycpa]

well we take audit on the same day! hopefully we can get our act together by then and slay this beast!

FAR 76
REG 76(2x)
BEC FAILED (2x)
AUD FAILED (2x)

"When you don't give up, YOU CANNOT FAIL"

[hopeful_cpa]

i'll be honest, i'm probably going to fail this stupid test… i dont feel comfortable at all or even feel like i understand a tiny bit of it.

BEC: Done
REG: Done
AUD: Done
FAR: Done

I'M DONE!!!!!! AAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[Anonymous]

Took audit yesterday and felt pretty adequately prepared.

Drilled Becker MCQs over the past two weeks. I can't stress how helpful it is to not only get the right answer, but realize why the other answers are wrong.

[twest]

Are ratios a big deal on the AUD exam? I can do the calcualtions but I dont' really get the meaning on some of them!

FAR - 63, 79
AUD - 83!
REG - 37, 79
BEC - 70, 79

[hopeful_cpa]

a quick question regarding detection risk if anybody can clarify for me.

if DR is high, does that means there is a less likely chance of auditor finding a material misstatement, or there is a higher chance of finding a material misstatement?

According to the book, DR is the probability that the auditor's substantive tests won't detect material misstatements.

BEC: Done
REG: Done
AUD: Done
FAR: Done

I'M DONE!!!!!! AAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[Anonymous]

@ hopeful – I was just re-reading this part. Pretty confusing. This is what I understand it to be: Low detection risk means there's a low chance that the auditor won't detect a material misstatement (which is good). High detection risk means there's a high chance that the auditor won't detect a material misstatement (which is bad). That's why when there's a high chance of material misstatements (RMM), you want there to be low detection risk (inverse relationship).

[hopeful_cpa]

@cpabear

if reliance is high, rmm is low, dr is high, and sub testing is low.

so what this is saying is that if we rely on the i/c, the risk of there being a mm is low. if the risk of there being an mm is low then the detection risk of that mm is high? therefore we need to do less sub testing? this doesnt make sense.

BEC: Done
REG: Done
AUD: Done
FAR: Done

I'M DONE!!!!!! AAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[Anonymous]

@hopeful. Huh? Haha. Reliance on internal controls (or no reliance) does not affect whether there are risks of material misstatement.

You first assess whether there are risks of material misstatement. (This step comes before you decide whether or not to rely or not rely on I/C.) If there is low risk of material misstatement (RMM), you can have higher detection risk (higher chance of not finding the material misstatement) b/c you've determined that even if you don't find it, it's probably not very material (hence the low RMM).

[hopeful_cpa]

gotcha!! there is a higher chance of NOT finding it… its all backwards to me.

BEC: Done
REG: Done
AUD: Done
FAR: Done

I'M DONE!!!!!! AAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[twest]

CPABear is correct. Whether or not you rely on the internal controls is a judgement call. If there is high RMM, then DR has to be low. And if DR must be low, you must do more Substantive Testing to make detection risk low.

FAR - 63, 79
AUD - 83!
REG - 37, 79
BEC - 70, 79

[Yvonne570]

Remember, detection risk is changed by the auditor. The risks the auditor cannot change is inherent risk and control risk. If control risk increases (weaknesses in controls), then the auditor must increase detection risk.

Detection risk is the level of work the auditor must do. If controls are good, then the auditor doesn't have to do as much (increase detection risk).

It's confusing due to the inverse effect: AR = IR x CR x DR. Think of it like this. Audit risk is 10. Then you need to allocate this to IR/CR/DR. 2 (IR) x 1 (CR) x 5 (DR) was the original assessment by the auditor. As they were progressing along, they found out that management was able to override controls.

They really do not want to trust the 1 CR. They could miss something that may have been overridden and could be a material item or fraud. So if they increase the 1 to 5 (because it was a profound risk), then detection risk would decrease to 1 (because audit risk would stay the same). The lower DR results in more manual substantive work.

AUD - Passed:)
FAR - Passed:)
REG - Retake TBD
BEC - Missed by 3 points Retake TBD

[hopeful_cpa]

Roger ties in reliance on internal control with everything else also.

BEC: Done
REG: Done
AUD: Done
FAR: Done

I'M DONE!!!!!! AAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[Anonymous]

Why is the audit test 4 hours?? It's not really taking me that long to go through the Becker MC. What is a good time allocation for the testlets and SIMS? Also are the Audit SIMS going to be way more difficult / different than the Becker SIMS (like it was for FAR and REG)?

[katiekanton]

My review materials disagree with some of what was stated above.

If control risk increases, then the auditor must DECREASE detection risk (inverse relationship). Detection risk DETERMINES the level of work the auditor must do, but it isn’t the work itself (and you can think of it as an inverse relationship in that if detection risk is low you have to do a lot of work, if detection risk is high you do less work).

Think of control risk as the risk that errors or fraud “slipped through” and weren't caught. If you have really great, strong controls, your control risk is lower, and you can handle higher detection risk, meaning you can do less work (tests of details).

Detection risk is the risk that you won’t catch the error that slipped through. You decrease detection risk (the risk you don't catch the error) by INCREASING substantive tests (looking at more documents/procedures). Thus, you lower detection risk by doing more work.

Don’t think of the equation and think of it logically. If you have to say you are 99% confident (allowing a 1% detection risk, which is very, very low) that the financial statements are not misstated, then you will have to do a heckuva lot more testing, and look at many, many more documents and observe more procedures than if you have to aim for only 85% confidence. Now to state it within our equation, if your detection risk has to be low, you have to increase substantive tests.

If I’m misunderstanding this, please let me know since I’m sitting soon.

AUD - 88
FAR - 90
REG - 85
BEC - 88

[trippj]

@katiekanton

I sit on wednesday. What you said nailed it down. CPAbear was saying the same thing. It's hard to explain it but you explained it the way that I have come to understand it. your good to go! 😉

It's just important to remember that the only aspect of that equation that the auditor can affect is the level of detection risk. I've come across several practice questions where the testers try to confuse you into thinking you can directly change the IR or CR and that is not the case. You can only change those variables by changing the level of detection risk.

BEC: 84
AUD: 11/16/2011
FAR: 2012
REG: 2012

[Author]

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