[Scared-cpa]

I have a basic understanding of the types of transaction cycles and how they relate to the control activities within internal control (SCARE). However, I suck at transaction cycle MCQs. I struggle to correlate what connections would cause a certain event of a lapse in judgment. Any tips or pointers on sucking less?

Example:
Which of the following would most likely be the result of ineffective internal control policies and procedures in the revenue cycle?
A. Final authorization of credit memos by personnel in the sales department could permit an employee defalcation scheme.
B. Fictitious transactions could be recorded, causing an understatement of revenues and an overstatement of receivables.
C. Irregularities in recording transactions in the subsidiary accounts could result in a delay in goods shipped.
D. Omission of shipping documents could go undetected, causing an understatement of inventory.

I struggle to follow the different answer choices and what effects they have.

"The more I practice, the luckier I get."

FAR - 67, 82 (Expires 07/31/18)
AUD - 68, 79
REG - 75
BEC - 82

Wiley CPAexcel + Ninja

I cannot believe I am done.

[IwannabeaCPA2017]

Is it A?

BEC- PASS (Expiring in DEC 2017)

REG- PASS (Expiring Feb 2018)

AUD- PASS (Expiring Oct 2018)

FAR- 65, 60, 59, 77!!! -GOD BLESS

If I can do it, anyone can do it!

 

[Scared-cpa]

Yes

"The more I practice, the luckier I get."

FAR - 67, 82 (Expires 07/31/18)
AUD - 68, 79
REG - 75
BEC - 82

Wiley CPAexcel + Ninja

I cannot believe I am done.

[Anonymous]

I think it's “A” as well. I hope I'm not wrong. This is what I think…

A: a person in the sales department should not be able to authorize credit memo's for issuance to a buyer. Someone in the sales dept should focus on selling the merchandise- accepting orders (recording/posting). If they are recording and authorizing it presents an opportunity to commit fraud (defalcation-aka theft, embezzlement, misappropriation of funds).If the seller can issue a credit memo for lower than the invoice amount or offset it against a balance due from a different buyer transaction, who is to say that they are actually repaying that money to the buyer.

B: Fake transactions would cause an overstatement of AR and overstatement of revenues
C: No clue why this isn't right, but I don't think it's better than A (LOL)
D: Not providing any shipping documents would cause in overstatement of Inventory because we wouldn't know that inventory was decreasing as we shipped it out

Do NOT quit! There's more in you and if you quit you'll never see it. Show you that you can do it.

AUD Passed  78
BEC Passed  79
FAR Passed  77
REG Passed 76

I'm tired of operating in fear and mediocrity. It's time to try. It's time to do. It's time to go.

[Anonymous]

Out of curiosity, what were the answer explanations? I want to see if I was approaching it from the right frame of mind.

Do NOT quit! There's more in you and if you quit you'll never see it. Show you that you can do it.

AUD Passed  78
BEC Passed  79
FAR Passed  77
REG Passed 76

I'm tired of operating in fear and mediocrity. It's time to try. It's time to do. It's time to go.

[Scared-cpa]

Thanks, KGreen. It's almost midnight here so I will find and post the explanation here in the morning! I just always find these questions so mentally draining. I struggle to follow the line of thinking I should have in order to answer the questions. Usually I get 75 or higher on section MCQs. I did all the transaction cycle sections today and struggled to get half of them right, and I'd say most of those were just luck. I really need to improve but I don't know how because the info in the book about transaction cycles I know, but the way the MCQS make you think about the interrelated cycles and controls, I just can't wrap my mind around.

"The more I practice, the luckier I get."

FAR - 67, 82 (Expires 07/31/18)
AUD - 68, 79
REG - 75
BEC - 82

Wiley CPAexcel + Ninja

I cannot believe I am done.

[Anonymous]

scared_cpa, I completely understand. I'm hoping my logic is right as I'm trying to take this as an opportunity to learn as well. I, too, get tripped up on these type of questions. Nonetheless, if we can just “think like an auditor” (whatever that means since we've never done it LOL) maybe it will make more sense to us. Tomorrow I plan on going out and getting a couple of poster boards to write this stuff out and read on around the house. I must do something to drill it into my head.

Do NOT quit! There's more in you and if you quit you'll never see it. Show you that you can do it.

AUD Passed  78
BEC Passed  79
FAR Passed  77
REG Passed 76

I'm tired of operating in fear and mediocrity. It's time to try. It's time to do. It's time to go.

[Anonymous]

These kinds of questions can really throw people off. Often there are two choices that are good and two that aren't. It's eliminating the less correct of the two good choices that is tough.
This is particularly the case with audit assertion questions too – I think they require some “analysis”, and during the heat of the exam, you only have so much time to ponder the situation in the question before you have to click one and move on to the next question. Fun times.

[Scared-cpa]

Here is the response to why answer A is correct:

“Allowing sales personnel to authorize credit memos is an internal control weakness that could permit an employee defalcation scheme. Employees could accept “kickbacks” from customers in exchange for authorizing credits against customer accounts.”

The short responses are one of the biggest things I dislike about CPAexcel but this question came from the Revenues-Receipts – Sales section of the Transaction Cycle series (section 75) if you'd like to see more questions like it.

Most questions take me 20 seconds or less to answer. But transaction cycles and the different sampling procedures usually a minute or longer per question. I guess they balance each other out in the long run. The only thing I know to do is practice them until my eyes fall out. Unfortunately, there doesn't seem to be a ‘magic' solution for me to understand them, although I feel as if there must be a major hole in my understanding to struggle so bad with these questions.

"The more I practice, the luckier I get."

FAR - 67, 82 (Expires 07/31/18)
AUD - 68, 79
REG - 75
BEC - 82

Wiley CPAexcel + Ninja

I cannot believe I am done.

[Anonymous]

Auditing MCQ's have the most subjective answer choices during the exam. Choose the “best” answer is another way of saying Goodluck and here is a 50/50 chance to earn points. Also, transaction cycles are a pain in the ass for everyone and are probably much much easier if you have been an auditor in the real world. You really have to put yourself in the shoes of the auditor and try to understand what the hell is going on. It's very abstract and conceptually challenging at times. Goodluck!

[Scared-cpa]

I'm trying to put myself in the auditor's shoes, it is just hard since I don't even know what it would be like to put myself in their shoes as I really don't have a clue what they do in real life haha. I'm trying my best to make each question seem like a real situation, though. And I'm glad I'm not the only one who struggles with transaction cycles and evidence gathering in general. I'm better with the broad questions that don't ask very specific details, but I suppose practice is the only way to improve!

"The more I practice, the luckier I get."

FAR - 67, 82 (Expires 07/31/18)
AUD - 68, 79
REG - 75
BEC - 82

Wiley CPAexcel + Ninja

I cannot believe I am done.

[Author]

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