2012 aud content

CPA EXAM REVIEW

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JJ~BECKERPROFESSIONAL EDUCATION

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Becker Professional Education I CPA Exam Review

AUDITING

program attendance record

Auditing

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AUDITING 1 AUDITING 2

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IMPORTANT NOTES TO STUDENTS REGARDING' THE BECKER PROMISE"

• You must stamp this sheet at the end of each class attended. This is the only acceptable record of your classroom attendance,

An overall percentage correct of 90% or higher is required of the homework to qualify for The Becker Promise.

Please fax documentation to 866-398-7375 no later than 30 days following the completion of each section.

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AUDITING

table af can tents

Auditing

Program attendance record v

Introduction Intro-1

AUDITING 1

1. Audited financial statements: The basics Al-3

2. Professional standards AI- 5

3. Reports on audited financial statements Al-12

4. Reports on comparative financial statements Al-42

5. Events occurring after year-end Al-46

6. Reporting on other information Al-51

7. Task-based simulations AI-59

8. Class questions Al-63

AUDITING 2

1. Quality control standards A2-3

2. Other engagements, reports, and accounting services A2-10

3. Compilation and review of financial statements A2-17

4. Reporting on comparative financial statements ..........................................................................................•........................A2-46

S. Review of interim financial information . A2-S0

6. letters for underwriters A2-53

7. Attest engagements AI-65

8. Class questions A2-85

AUDITING 3

1. Engagement acceptance and understanding the assignment . A3-3

2. Planning and supervision A3-9

3. Audit risk A.-23

4. Fraud risk A3-27

5. Assessing the risk of material misstatement A3-37

6. Internal control A3-45

7. Responding to the assessed risk of material misstatement A3-53


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Auditing Becker Professional Education I CPA Exam Review

AUDITING 4

1. Audit evidence A4-3

2. Audit procedures by transaction cycle A4-17

3. Other audit procedures A4-47

4. Evaluating audit findings A4-54

5. Appendix I: Financial ratios A4-59

6. Appendix II: Control procedures and tests of controls A4-71


AUDITING 5

1. Audit sampling AS-3

2. Internal control communications AS-22

3. Communication with those charged with governance AS-50

4. Management representations AS.55

5. Class questions AS-59

AUDITING 6

1. Professional responsibilities A6-3

2. Audit documentation A6-31

3. The effect of information technology on the audit A6-35

4. Government auditing A6-41

5. Class questions A6-S9

Class question explanations cQ-1

Glossary Glossary-l

Index Index-l

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AUDITING & ATTESTATION CONTENT SPECIFICATION OUTLINE

AUDITING & ATTESTATION

4 hours

Auditing

• 60 Points •Testlet 111 Testlet 112 Testlet #3

30 30 30MC MC MC

Questions Questions Questions

-+- 40 points ----...

Testlet 114

7Task-basedsimulations

I SO-55 minutes ~ I 50-55 minutes ~ I 50·55 minutes ~ I 60-75 minutes ~

I. Auditing and attestation. engagement acceptance and understanding the assIgnment 12-16%

A. Determine nature and scope of engagement

8. Consider the firm's system of quallty control for policies andprocedures pertaining to client acceptance and continuance,including:

1. The CPA firm's ability to perform the engagement withinreporting deadlines

2. Experience and availability of firm personnel to meetstaffing and supervision requirements

3. Whether Independence can be maintained

4. Integrity of client management

5. Appropriateness of the engagement's scope to meet theclient's needs

C. Communicate with the predecessor accountant or auditor

D. Establish an understanding with the client and document theunderstanding through an engagement lener or other writtencommunication with the client

E. Consider other planning matters

1. Consider using the work of other independent auditors

2. Determine the extent of the Involvement of professionalspossessing specialized skills

3. Consider the independence, objectivity, and competencyof the internal audit function

F. Identify matters and prepare documentation forcommunications with those charged with governance

II. Auditing and attestation: understanding the entity and its environment (including internal controll 16-20%

A. Determine and document materiality levels for financialstatements taken as a whole

B. Conduct and document risk assessment discussions amongaudit team, concurrently with discussion on susceptibilityof the entity's financial statement to material misstatementdue to fraud

C. Consideration of fraud

1. Identify characteristics of fraud

2. Document required discussions regarding risk of fraud

3. Document Inquiries of management about fraud

4. Identify and assess risks that may result in materialmisstatements due to fraud

D. Perform and document risk assessment procedures

1. Identify, conduct, and document appropriate inquiries ofmanagement and others within the entity

2. Perform appropriate analytical procedures to understand theentity and Identify areas of risk

3. Obtain information to support inquiries through observationand inspection (including reading corporate minutes, etc.)

E. Consider additional aspects of the entity and Its environment,including: Industry, regulatory and other external factors;strategies and business risks; and financial performance

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F. Consider internal control

1. Perform procedures to assess the control environment,Including consideration of the COSO framework andidentifying entity-level controls

2. Obtain and document an understanding of businessprocesses and Information flows

3. Perform and document walkthroughs of transactions frominception through recording In the general ledger andpresentation in financial statements

4. Determine the effect of information technology on theeffectiveness of an entity's internal control

S. Perform risk assessment procedures to evaluate the designand implementation of Internal controls relevant to anaudit of financial statements

6. Identify key risks associated with general controls In afinancial IT environment, including change management,backup/recovery, and network access (e.g., administrativerights)

7. Identify key risks associated with application functionalitythat supports financial transaction cycles, including:application access control le.g., administrative accessrights); controls over Interfaces, integrations, ande-Commerce; and significant algorithms, reports, valIdation,edit checks, error handling, etc.

Intro-3

Auditing

8. Assess whether the entity has designed controls to mitigatekey risks associated with general controls or applicationfunctionality

9. Identify controls relevant to reliable financial reporting andthe period-end financial reporting process

10. Consider limitations of internal control

11. Consider the effects of service organizations on internalcontrol

12. Consider the risk of management override of internalcontrols

G. Document an understanding of the entity and its environment.including each component of the entity's internal control, Inorder to assess risks

H. Assess and document the risk of material misstatements

1. Identify and document financial statement assertions andformulate audit objectives including significant financialstatement balances, classes of transactions, disclosures, andaccounting estimates

2. Relate the Identified risks to relevant assertions and considerwhether the risks could result In a material misstatement tothe financial statements


3. Assess and document the risk of material misstatementthat relates to both financial statement level and specificassertions

4. Identify and document conditIons and events that mayindicate risks of material misstatement

I. Identify and document significant risks that require specialaudit consideration

1. Risk of fraud

2. Significant recent economic, accounting. or otherdevelopments

3. Related parties and related party transactions

4. Improper revenue recognition

5. Non-routine or complex transactions

6. Significant management estimates

7. Illegal acts

III. AudltlOg and attestation. performing audit procedures and evaluating eVidence 16-20%

A. Develop overall responses to risks

1. Develop overall responses to risks identified and use therisks of material misstatement to drive the nature, timing,and extent of further audit procedures

2. Document significant risks identified, related controlsevaluated, and overall responses to address assessed risks

3. Determine and document level(s) of tolerable misstatement

B. Perform audit procedures responsive to risks of materialmisstatement; obtain and document evidence to form a basis forconclusions

1. Design and perform audit procedures whose nature. timing.and extent are responsive to the assessed risk of materialmisstatement

2. Integrating audits: In an integrated audit of internal controlover financial reporting and the financial statements, designand perform testing of controls to accomplish the objectivesof both audits simultaneously

3. Design, perform, and document tests of controls to evaluatedesign effectrveness

4. Design, perform, and document tests of controls to evaluateoperating effectiveness

S. Perform substantive procedures

6. Perform audit sampling

7. Perform analytical procedures

Intr0-4

8. Confirm balances and/or transactions with third parties

9. Examine inventories and other assets

10. Perform other tests of details, balances, and journal entries

11. Perform computer-assisted audit techniques (CAATs)/Including data query, extraction, and analysis

12. Perform audit procedures on significant managementestimates

13. Auditing fair value measurements and disclosures, includingthe use of specialists in evaluating estimates

14. Perform tests on unusual year·end transactions

15. Audits performed in accordance with InternationalStandards on Auditing (ISAs) or auditing standards ofanother country: determine if differences exist and whetheradditional audit procedures are required

16. Evaluate contingencies

17. Obtain and evaluate lawyers' letters

18. Review subsequent events

19. Obtaining and placing reliance on representations frommanagement

20. Identify material weaknesses, significant deficiencies, andother control deficiencies

21. Identify matters for communication with those chargedwith governance

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Becker Professional Education I CPA Ekilm Revi£>w Auditing

IV. AudIting and attestatIon. evaluating audIt findings, commUniCations, and reporting 1&-20%

A. Perform analytical procedures

B. Evaluate the sufficiency and appropriateness of audit evidenceand document engagement conclusions

C. Evaluate whether audit documentation Is in accordance withprofessional standards

D. Review the work performed by others to provide reasonableassurance that objectives are achieved

E. Document the summary of uncorrected misstatements andrelated conclusions

F. Evaluate whether financial statements are free of material

misstatement

G. Consider the entlty's ability to continue as a going concern

H. Consider other information in documents containing auditedfinancial statements (e.g., supplemental information andmanagement's discussion and analysis)

I. Retain audit documentation as required by standards and

regulations

J. Prepare communications

1. Reports on audited financial statements

2. Reports required by government auditing standards

3. Reports on compliance with laws and regulations

4. Reports on internal control

5. Reports on the processing of transactions by serviceorganizations

6. Reports on agreed·upon procedures

7. Reports on financial forecasts and projections

8. Reports on pro forma financial information

9. Special reports

10. Reissue reports

11. Communicate internal control related matters identified inthe audit

12. Communications with those charged with governance

13. Subsequent discovery of facts existing at the date of the

auditor's report

14. Consideration after the report date of omitted procedures

V. Accounting and review services engagements 12-16%

A. Plan the engagement

1. Determine nature and scope of engagement

2. Decide whether to accept or continue the client andengagement including determining the appropriateness

of the engagement to meet the client's needs andconsideration of Independence standards

3. Establish an understanding with the client and documentthe understanding through an engagement letter or otherwritten communication with the client

4. Consider change In engagement

5. Determine if reports are to be used by third parties

B. Obtain and document evidence to form a basis for conclusions

1. Obtain an understanding of the client's operations, business,

and industry

2. Obtain knowledge of accounting principles and practices inthe industry and of the client

3. Obtain knowledge of stated qualifications of accountingpersonnel

4. Perform analytical procedures for review services

S. Obtain representations from management for reviewservices

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6. Perform other engagement procedures

7. Consider departures from generally accepted accountingprinciples (GAAP) or other comprehensIve basis of

accounting (OCBOA)

8. Prepare documentation from evidence gathered

9. Retain documentation as required by standards

10. Review the work performed to provide reasonable

assurance that objectives are achieved

C. Prepare communications

1. Reports on complied financial statements

2. Reports on reviewed financial statements

3. Restricted use of reports

4. Communicating to management and others

5. Subsequent discovery of facts existing at the date of thereport

6. Consider degree of responsibility for supplementaryInformation

Auditing Becker Professional Education I CPA Exam Review

VI. ProfessIonal responsibilities 16-20%

A. Ethics and independence

1. Code of Professional Conduct (AICPA)

2. Public Company Accounting Oversight Board (PCAOB)

3. U. S, Securities and Exchange Commission (SEC)

4. Government Accountability Office (GAO)

5. Department of Labor (DOL)

6. Sarbanes-Oxley Act of 2002, Title II

7. Sarbanes-Oxley Act of 2002, Title III, Section 303

8. Code of Ethics for Professional Accountants (IFAC)

Intro-6

B. Other professional responsibilities

1. Sarbanes-Oxley Act of 2002, Title tV

2. Sarbanes-Oxley Act of 2002, Title I

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2012 aud content

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