Ray, Delaney Patrick R. Wiley CPA Exam Review 2012, Auditing and Attestation 9th Edition

676 Pages·62.649 MB·English

by  Whittington O.

GENERALCOMMENTSONTHEEXAMINATION
TheUniformCPA Examination isdelivered usingcomputer-basedtesting (CBT). Computer-based testinghasseveral
advantages. You maytakethe examonesection atatime. Asaresultyour studiescan be focused onthat one section,
improvingyour chances for success. Inaddition, the examis no longeroffered twice ayear. During eightmonthsof
every year, you may take the examon your schedule,six daysaweek andinthe morningor in theafternoon.
Successfulcompletionofthe AuditingandAttestation section isanattainablegoal. Keep this point foremost inyour
mind asyou study thefirst fourchaptersinthisvolume and developyourstudy plan.
PurposeoftheExamination
I
TheUniformCPA Examination isdesignedto test the entry-levelknowledgeand skillsnecessarytoprotect the public
interest. Anentry-levelCPA isdefinedasone who has fulfilled the applicablejurisdiction'seducational requirements
and has theknowledgeand skillstypicallypossessed by apersonwith uptotwo yearsofexperience. These knowledge
and skillswere identifiedthrough aPracticeAnalysisperformedin2008, whichserved as abasis forthedevelopmentof
the contentspecificationsfor the exambeginningin 2011. As indicatedinthe new Contentand Skills Specifications
Inadditiontodemonstratingknowledgeandunderstandingoftheprofessional standards,candidatesarerequiredto
demonstratetheskillsrequiredtoapply thatknowledgein performingauditing andattestationtasks ascertifiedpublic
accountants....Candidatesarealsoexpected10performthe followingtasks:
Demonstrateanawarenessandunderstandingofthe processbywhichstandardsand professionalrequirementsareestab
lishedforaudit,attestation,andotherservicesperformedbyCPAs. includingtheroleofstandard-settingbodieswithin the
USandthose bodieswith theauthority topromulgateinternationalstandards.
Differentiatebetweenaudits.attestationandassuranceservices,compilations,and reviews.
Differentiatebetweentheprofessionalstandardsfor issuersandnonissuers.
Identify situationsthatmightbeunethicaloraviolationofprofessionalstandards,performresearchandconsultationsas ap-
propriate,anddeterminetheappropriateaction. 06
Recognizepotentiallyunethicalbehaviorofclientsand determinetheimpacton the servicesbeingperformed.
Demonstratethe importanceofidentifyingand adheringtorequirements,rules, and standardsthatareestablishedbylicens
ingboardswithintheirstate,andwhichmayplaceadditional professionalrequirementsspecifictotheirstate ofpractice.
Appropriatelyapplyprofessionalrequirementsinpractice,anddifferentiatebetweenunconditionalrequirementsand pre
sumptivelymandatoryrequirements.
Exerciseduecareinthe performanceofwork.
Demonstrateanappropriatelevelofprofessionalskepticismintheperformanceofwork.
Maintainindependenceinmental attitude inallmailersrelatingtotheaudit.
Research relevantprofessionalliterature.
The CPA examinationisoneofmany screeningdevicesto assure thecompetenceofthoselicensedtoperformthe at
test function andtorenderprofessional accountingservices. Otherscreeningdevices includeeducationalrequirements,
ethicsexaminations, and workexperience.
TheCPA examinationappearstotestthematerialcoveredinaccountingprogramsofthe betterbusinessschools. It
alsoappearstobebasedupon the body ofknowledgeessential forthepracticeof public accountingandthe auditofa
medium-sizedclient. Sincethe examinationisprimarilya textbookoracademicexamination,youshouldplan on taking
itassoon aspossibleaftercompletingyourrequirededucation.
ExaminationContent
Guidanceconcerningtopicalcontentofthecomputer-basedexam inAuditingand Attestationcanbefound inadocu
mentpreparedbytheBoardofExaminersoftheAICPAentitledContentandSkillSpecificationsfor the Uniform CPA
Exam. Wehave includedthe contentoutlineforAuditingandAttestationatthe beginningofChapter5. The outline
shouldbeusedasanindicationofthe topics'relativeemphasison theexam.
The Board'sobjectivein preparingthisdetailedlistingoftopics tested on the examistohelp "in assuringthe contin
uing validityandreliabilityofthe UniformCPA Examination." Theseoutlinesare anexcellentsource ofguidancecon
cerningthe areas and emphasistobegiven each area on futureexams.
Thenew Contentand SkillSpecificationOutlinesforthe CPA examination,includingthe testing ofInternationalAu
ditingStandards,wentinto effectJanuary 1,2011. In addition, theAICPAadoptedCBT-e,whichisanew computer
platform. The majorchange from yourstandpoint isthatsimulationsaresmallerin sizeand alargernumberofthese
I Moreinformationmay beobtainedfrom theAICPA"s UniformCPAExamination CandidateBulletin,whichyoucan findonthe
AICPA"sWebsiteatwww.cpa-exam.org.
3
4 Chapter 1: BeginningYourCPA ReviewProgram
"task-basedsimulations"are includedon the Auditingand Attestation, Financial Accountingand Reporting,and
Regulationexams. In addition,all simulations that test writing skillshavebeenmovedtothe BusinessEnvironmentand
Conceptsexam.
Newaccounting and auditing pronouncements, includingthose in thegovernmentaland not-for-profitareas.are tested
inthe testing windowstartingsix monthsafter the pronouncement'seffectivedate. Ifearly application is permitted,a
pronouncement istested six months afterthe issuancedate: candidates are responsiblefor the old pronouncementalso
until itissuperseded. FederalJawsare tested six monthsfollowing theireffectivedare. TheAICPA postscontent
changesregularlyon itsInternetsite atwww.cpa-exarn.org.
Nondisclosureand ComputerizationofExamination
BeginningMay 1996, the UniformCPA Examinationbecamenondisclosed. Foreachexamsection,candidatesare
requiredto agreeto aStatementofConfidentiality. whichstates thatthey will not divulgethe natureand contentofany
examquestion. Theexam iscomputer-based, and candidatestake the exam at Prometric sites in the 55jurisdictionsin
which theexamis offered. The CPA exam isofferedcontinuallyduring the testingwindowsshownbelow.
I
TestingWindow Januarythrough Octoberthrough
rApril throughMa)' JulythroughAugust
(Exam AvailabJe) February November
AICPA
Review & Update March June September December !
(ExamUnavailable) I
One or moreexam sectionsmay betaken during any exam window, and the sectionsmay be takenin any desired or
der. However,nocandidatewillbeallowedto sitforthesamesectionmorethanonceduringanygiventesting
window. Inaddition,acandidatemustpassall foursectionsofthe CPAexamwithina"rolling"eighteen-monthperiod,
which beginson thedateheorshepassesasection. Inotherwords, you mustpasstheotherthreesectionsoftheexam
within eighteenmonthsofwhen you passthe firstsection. Ifyou donotpassall sectionswithin the eighteen-monthpe
riod, creditfor any sectionts) passedoutside the eighteen-monthperiod will expireand the section(s)mustbe retaken.
Typesof Questions
The computer-basedUniformCPAExaminationconsistsoftwo basicquestion formats.
e
l. Multiple-Choice-questionsrequiringthe selectionofone offourresponsestoashortscenario.
2. Task-BasedSimulations-shortcase studiesthat are used toassess knowledgeand skillsin acontext approximat
ing thatfoundon thejobthrough the use ofrealisticscenariosand tasks,and accesstonormallyavailableandfa
miliarresources.
The multiple-choicequestionsare much likethe ones that have constituted amajorityofthe CPAexamination for
years. Andthegoodnewsisthatthesetypesofquestionsconstituteabout60% ofthe AuditingandAttestationsec
tion.
ProcessforSittingfortheExamination
Whilethereare some variationsinthe process from statetostate,thebasicprocessfor sittingfor the CPAexamination
may bedescribedas follows:
1. Applyto takethe examination(request,complete,and submitan application)
2. Paymentofexaminationfees
3. Review the tutorialand sampletests
4. ReceiveyourNoticetoSchedule(NTS)
5. Scheduleyourexarninatiorus)
6. Takeyourexaminationts)
7. Receive yourScoreReport(s)
Applyingto TaketheExamination
The righttopracticepublicaccountingas aCPA isgovernedby individual statestatutes. Whilesomerulesregarding
the practiceofpublicaccountingvary from jurisdictiontojurisdiction,all StateBoardsofAccountancyuse the Uniform
CPA Examination andAICPAadvisorygradingserviceasoneofthe requirementsto practicepublicaccounting. The
State BoardsofAccountancydeterminethe requirements tositforthe exam (e.g.,educationrequirements). Forcompari
sons ofrequirementsfor variousstateboardsandthosepoliciesthatare uniformacrossjurisdictionsyoushouJdreferto
theWeb site oftheNationalAssociationofStateBoardsofAccountancy(NASBA)at www.nasba.org.
Afrequentproblemcandidatesencounteris failure toapply by thedeadline. Applytositfortheexaminationearly.
Also,youshould useextremecareinfillingouttheapplicationand mailingrequiredmaterialstoyourStateBoard
ofAccountancy. If possible,haveafriend reviewyourcompletedapplication beforemailingwithcheckandotherdoc
urnentation. Thenameon yourapplication mustappearexactlythe sameas itappearson the identification you planto
Chapter1: BeginningYourCPAReviewProgram 5
use atthe testingcenter. Candidatesmay miss aparticularCPA examinationwindow simply becauseofminor technical
details that were overlooked(checknot signed, itemsnotenclosed,question notanswered on application,etc.). Because
ofthevery high volumeofapplicationsreceivedinthe morepopulousstates,theadministrativestaffdoesnothave
timeto canorwritetocorrectminordetailsand willsimply rejectyourapplication.
The NASBA Web sitehaslinks tothe registration informationfor all55jurisdictions. Itispossibleforcandidates to
sitfor the examinationataPrometricsite inanystateorterritory. Candidatesdesiring todo so shouldreferto theregis
tration informationfortheapplicable State BoardofAccountancy.
ObtainingtheNoticetoSchedule
Once yourapplicationhasbeen processed andyouhavepaid allfees, you willreceive aNoticetoSchedule(NTS)
from NASBA. The NTSwill listthe section(s)oftheexaminationthat youareapproved to take. When youreceivethe
.NTS,verifythat allinformation iscorrect. Becertainthat thenameappearingontheNTS matchesEXACTLYthe
nameontheidentification-documentsthatyou willuse duringcheck-inatthe testingcenter. Ifthe informationis
incorrectorthenamedocs notmatch,immediatelycontactyourboardofaccountancyorits designatedagent to
requesta correction. You mustbringyourNTSwith you to theexamination.
ExamScheduling
Onceyou have beencleared totake the exam bytheapplicablestateboard, youwillreceive by mailaNotice to
Schedule(NTS)and maythenscheduletosit foroneormore sectionsoftheexam.
You havethe following twooptions for scheduling yourexamination:
1. Visitwww.prometrie.com/cpaon theInternet
This istheeasiestandquickestway to scheduleanexaminationappointment(or cancel and rescheduleanap
pointment, ifnecessary). SimplygototheWebsite, select"Scheduleyour test," and follow thedirections. Itis
advisedthatyouprintandkeepfor your recordstheconfirmationnumberforyour appointment.
2. Call800-580-9648(CandidateServicesCallCenter)
Beforeyoucall,youmust haveyour NTSinfront ofyou, and have inmindseveraltimes,dates, andlocations
thatwouldworkforyou. You will notreceive written confirmationofyour appointment. Be sure towrite down
the date, time,location, and confirmationnumberforeachofyourappointments.
You shouldalsobeawarethat ifyou have tocancelorrescheduleyourappointment,you may besubject toa
cancellation/reschedulingfee. TheAICPA's Uniform CPAExaminationCandidateBulletin lists the reschedulingand
cancellation fees.
Toassurethatyou getyourdesired locationand timeperiod,itis imperativethat you scheduleearly. Toget
yourfirstchoiceofdates,you areadvised toscheduleat least45 daysin advance. You will not bescheduledforan
examfewerthan5daysbeforetesting.
ATTRIBUTESOFEXAMINATIONSUCCESS
Yourprimaryobjectiveinpreparingfor theAuditing andAttestationsection istopass. Otherobjectivessuch as
learningnew and reviewing oldmaterial shouldbeconsideredsecondary. Thesixattributes'ofexaminationsuccessdis
cussedbeloware essential. Youshould study theattributes and work toward achieving/developingeach ofthem before
taking the examination.
1. KnowledgeofMaterial
Twopointsarerelevant to"knowledgeofmaterial" asan attributeofexaminationsuccess. First,thereisadistinct
differencebetweenbeingfamiliarwith material andknowingthe material. Frequently candidatesconfusefamiliarity
with knowledge. Canyourememberwhen youjustcould not answeranexaminationquestionordidpoorlyonanex
amination,butmaintained toyourselforyour instructorthatyou knewthematerial? You probablywereonlyfamiliar
with thematerial. On theCPA examination,familiarity isinsufficient;you mustknow the material. Remember, the
examwill test yourability toanalyzedata, makejudgments,communicate,performresearch, and demonstrateunder
standingofthe material. Knowledgeablediscussion ofthematerial isrequiredonthe CPAexamination. This text
containsoutlinesofthetopicalareas inauditingincluding outlinesofprofessionalpronouncements,etc. Return tothe
original material(e.g.,SAS, yourauditingtextbook,etc.) only ifthe outlinesdonotreinforce material youalready
know. Second,theAuditing and Attestationexam testsaliterallyoverwhelming amountofmaterial atarigorous
level. Furthermore,asnoted earlier, theCPAexam willtest new material,sometimesas early assixmonths afteris
suance. Inotherwords, youare notonlyresponsibleformaterial you learned inyour auditing andattestation
course(s),butalso forallnewdevelopmentsinauditing and attestation.
2. CommitmenttoExamPreparation
YourpreparationfortheCPA examshould beginatleasttwomonthsprior tothedateyou plantoscheduleyour
seatingfor an exampart. Ifyou plan totake morethanonepart,you should startearlier. Overthecourse ofyour
6 Chapter1: BeginningYourCPAReviewProgram
preparation,you will experiencemany peaks and valleys. There will be days when youfeelcompletelypreparedand
there will also be days whenyou feel totallyoverwhelmed. This isnot unusual and, infact,should beexpected.
The CPA examis a very difficultand challengingexam. How many timesinyour collegecareerdid you study
months for an exam? Probably nottoo many. Therefore,candidatesneed toremain focused onthe objective-
succeedingon the CPA exam.
Developa personal studyplan sothat you are reviewingmaterial daily. Ofcourse,youshould scheduleanocca
sional study breakto helpyou relax, butdon'tscheduletoomany breaks. Candidateswhodedicate themselvesto
studyinghave amuch greaterchanceofgoing throughthis processonlyone time. On theother hand, a lack offocus
and piecemealpreparationwill only extend theprocessover anumberofexamsittings.
3. SolutionsApproach
The solutionsapproach isasystematicapproachtosolvingthequestionsand task-basedsimulations found onthe
CPA examination. Manycandidatesknow the materialfairly well when they sit fortheCPAexam, but they donot
know howto take the examination. Candidatesgenerally neither worknoranswerquestionsefficientlyin termsof
time orgrades. The solutionsapproach permitsyou toavoiddrawing"blanks"on CPA exam questions; using theso
lutions approachcoupledwith gradinginsights(seebelow)allows you topickup asizable numberofpointsontest
material with which you arenot familiar. Chapter3outlinesthesolutionsapproachformultiple-choicequestionsand
task-basedsimulations.
4. GradingInsights
Your scoreon each sectionoftheexam isdeterminedbythesum ofpointsassigned toindividualquestionsand
simulations. Thus, you mustattempttomaximizeyourpoints oneachindividual item.
The multiple-choicequestionswithin eachsectionareorganizedintothree"groupswhicharereferred toas tesrlets.
Each multiple-choicetestletiscomprisedofapproximately30 multiple-choicequestions. Themultiple-choicetestlets
varyinoveralldifficulty. Atestletislabeledeither"mediumdifficult"or "difficult"based onits makeup. A"diffi
cult" testlethas ahigherpercentageofhard questionsthan a"mediumdifficult"testlets. Everycandidate'sfirst
multiple-choicetestletineach sectionwill bea"mediumdifficult" testlet. Ifacandidatescores wellon the first
testlet, heorshewill receivea"difficult"secondtestlet. Candidatesthatdo not performwellonthe first testletre
ceive asecond "mediumdifficult"testlet. Becausethescoringproceduretakesthe difficultyofthe testletinto ac
count,candidatesare scored.fairlyregardlessofthe type oftestlets theyreceive.
Each multiple-choicetestletcontains"operational"and"pretest"questions. The operationalquestionsare theonly
ones thatare used todetermineyour score. Pretestquestionsarenotscored; they are being tested forfuture use asop
erationalquestions. However,you have no way ofknowingwhich questionsare operational and which questionsare
pretest questions. Therefore,you must approacheachquestionasifitwill be used todetermineyourgrade.
Task-basedsimulationsincludemore extensivescenariosandrequirements. Forexample,the requirementsmay
involvecalculations,form completion,orresearch. The points assigned totherequirementswillvary accordingto
theirdifficulty. Theetask-based simulationsmakeuse ofanumberofcommonlyused toolssuch asspreadsheetsand
electronicresearchdatabases. Therefore,you need to become proficientin the useofthese tools tomaximizeyour
score onthe simulations.
CPAExam scores arcreportedon ascalefrom 0to 99. The total score isnot apercentcorrectscore. Itis acom
bination ofscoresfrom the multiple-choiceand simulationportionsofthe examconsideringthe relativedifficultyof
theitems. A total scoreof75 isrequiredto passeachsection.
TheAICPAincludesatutorialand sampleexaminationsonitsWebsite that allowyou togetexperiencewith the
useoftheactual computertools usedon theCPAexam. Also, more experience with computertestingcan beobtained
by using Wiley CPA Exam Review TestBank.
5. ExaminationStrategy
Prior tosittingforthe examination,itis importanttodevelopanexaminationstrategy(i.e., anapproachtoworking
efficientlythroughoutthe exam). Yourabilitytocopesuccessfullywith4 hoursofexaminationcanbe improvedby
a. Recognizingthe importanceand usefulnessofan examinationstrategy
b. Using Chapter4, Takingthe Examination, and previousexaminationexperiencetodevelopa"personalstrategy"
for theexam
c. Testingyour"personal strategy"onexampleexaminationsunderconditionssimilarto thoseatthe testingcenters
(using similartoolsand databasesand with atimelimit)
6. Examination Confidence
Youneed confidencetoendurethephysicalandmentaldemandsof4 hoursoftest-takingundertremendouspres
sure. Examinationconfidenceresultsfrom properpreparationforthe examwhich includesmastering thefirstfive
attributesofexaminationsuccess. Examinationconfidenceisnecessarytoenableyou toovercomethe initialfrustra
tion withquestionsfor whichyou may not be specificallyprepared.
This study manual,whenproperlyused, contributestoyourexamination confidence. Buildconfidenceby com
pletingthequestionscontainedherein.
Chapter1: BeginningYourCPA ReviewProgram 7
CommonCandidate Mistakes
TheCPA Exam isaformidablehurdle inyour accountingcareer. 'Witha pass rate ofabout459i:on each section, the
levelofdifficulty isobvious. The good news, though, isthatabout75% ofall candidates(first-timeand re-exarn) sitting
foreachexaminationeventuallypass. The authors believethatthefirst-time pass ratecould behigherifcandidateswould
bemorecareful. Sevencommon mistakes thatmanycandidatesmake are
1. Failure to understandtheexam question requirements
') Misunderstanding thesupportingtext oftheproblem
3. Lack ofknowledgeofmaterial tested, especiallyrecently issued pronouncements
4. Failure todevelopproficiency with computer-based testingand practicetools such aselectronic researchdatabases
andspreadsheets
~). Inability toapply thesolutionsapproach
6. Lackofanexamstrategy(e.g.,allocation oftime)
7. Sloppinessand logical errors
These mistakes arenot mutually exclusive. Candidatesmaycommitone or more oftheabove items. Remindyourself
thatwhenyou decrease the numberofcommon mistakes,youincrease yourchancesofsuccessfullybecomingaCPA.
Take thetime toread carefullytheexam question requirements. Donotjumpinto aquick start,only to laterfindoutthat
youdidn'tunderstand what informationtheexaminerswereaskingfor. Read slowlyandcarefully. Taketime torecall
yourknowledge. Respond tothequestion asked. Apply anexamstrategysuchasallocatingyourtime amongallques
tionformats. Do not spendtoo muchtime onthe multiple-choicetestlets,leavingno time tospend on preparingyour
simulationresponses. Write neatly and label allanswersections. Answerquestionsquickly butprecisely, avoid common
mistakes, andincrease yourscore.
PURPOSEAND ORGANIZATIONOFTHISREVIEWTEXTBOOK
This bookisdesignedtohelp youprepareadequatelyfortheAuditingand Attestationexamination. Thereisnoeasy
waytoprepare forthe successfulcompletionofthe CPAExamination; however, through theuseof this manual,your
approach willbe systematicandlogical
Theobjectiveofthis book istoprovidestudy materialssupportive-toCPAcandidates. While noguaranteesaremade
concerningthe~')uccessofthose usingthis text, this book promotesefficientpreparationby
1. Explaininghow to maximizeyourscorethrough analysisofexaminationgradingandillustrationofthesolutions
approach. .
2. Definingareas testedthrough the useofthe contentspecificationoutlines. Note thatpredictionsof future exams
arenotmade. You should prepare yourselffor all possibletopics rather thangamblingontheappearanceofcer
tainquestions.
3. Organizingyourstudyprogrambycomprehensivelyoutliningallof thesubject mattertested 011theexamination
ineight easy-to-usestudy modules. Each studymodule isamanageabletask which facilitates yourexamprepara
tion. Turn toChapter5andperuse thecontentstogetafeelfor the organizationofthisbook.
4. ProvidingCPAcandidateswith examinationquestionsorganizedby topic(e.g.,internalcontrol,audit reports,
etc.). Questions have alsobeendevelopedfor new areasandinsimulation format.· .
5. ExplainingtheAICPA unofficialanswersto theexaminationquestionsincludedinthis text. TheAICPApub
lishesunofficial answersfor allquestions from exams administered priorto 1996andforanyreleasedquestions
fromexamsadministeredonorafter May 1996. However, noexplanationismadeoftheapproachthat should
havebeen appliedtotheexaminationquestionstoobtain these unofficial answers.
Asyouread the next few paragraphswhich describe thecontents ofthis book,flip through thechapterstogainagen-
eralfamiliarity with the book'sorganizationand contents. Chapters 2,'3,and 4 are tohelp youmaximizeyourscore.
Chapter2 ExaminationGrading
Chapter 3 TheSolutionsApproach
Chapter 4 TakingtheExamination
Chapters 2,3,and4containmaterialthatshouldbe kept inmindthroughoutyourstudyprogram. Referback tothem
frequently. Rereadthem for afinal timejustbeforeyou sitfortheexam.
TheAuditingand AttestationModules contain
1. AICPA ContentSpecificationOutlinesofmaterialtestedonthe Auditingand AttestationExamination
2. Multiple-choicequestions
3. Task-basedsimulations
4. AICPA unofficial answers withtheauthor'sexplanationsforthe multiple-choicequestions
5. Authoranswersto task-basedsimulations
8 Chapter1: BeginningYourCPAReviewProgram
Alsoincludedatthe endofthis textisacompleteSampleAuditingand AttestationCPA Examination. Thesample
exam isincluded tohelpcandidatesgain experience intakinga"realistic" exam. Whilestudying the modules, the candi
datescan becomeaccustomedtoconcentratingon fairly narrowtopics. By working throughthe sampleexaminationnear
the end oftheirstudy programs, candidateswill be betterpreparedfortakingtheactualexamination. Becausesometask
based simulationsrequire the use ofresearchmaterials, itis useful tohave the appropriateelectronicresearchdatabase
(e.g., AICPAResource: Accountingand Auditing)or printedversionsofprofessional standardstocomplete the sample
examination. AICPAResource: Accountingand Auditingisavailableatdiscountedpricestostudentand faculty mem
bersof theAICPA. Rememberthatthisresearchmaterial willnot beavailableto answerthemultiple-choiceques
tions.
OtherTextbooks
Thistext isacomprehensivecompilationofstudyguidesand outlines;itshouldnot be necessarytosupplementthem
with textbooksand othermaterialsfor mosttopics. Youprobablyalreadyhavean auditingtextbook. Insuchacase,you
must make thedecision whethertoreplaceitand tradefamiliarity(includingnotes therein.etc.), with the costand incon
venienceofobtainingthe newertext containinga moreupdatedpresentation.
Beforespendingtimeandmoney acquiringa newbook,beginyourstudyprogramwith CPAEXAMiNATIONRE
VIEW: AUDITINGANDA.1TESTATIONtodetermineyour need forasupplemental text.
OrderingOtherTextualMaterials
Ifyou want toorderAICPA materials,locatean AICPAeducatormemberto orderyourmaterials.sinceeducator
membersareentitledto adiscountand may placeWebsite ortelephoneorders.
AICPA(CPA2Biz)
Telephone: [phone]
Website: www.CPA2Biz.com
A varietyofsupplementalCPAproductsare availablefrom John Wiley & Sons,Inc. By using avarietyoflearning
techniques,such assoftware,computer-basedlearning,andaudioCDs, the candidateismorelikelytoremainfocused
duringthestudy processand toretain informationfor alongerperiodoftime. Visitour Web site atwww.wiley.com/cpa
forotherproducts,supplements,and updates.
WorkingCPAQuestions
TheAICPAcontentoutlines,studyoutlines,etc., will be used toacquireand assimilatetheknowledgetestedon the.
examination. This,however. shouldbeonly one-halfofyourpreparationprogram. Theotherhalfshouldbespentprac
ticing how toworkquestions. Somecandidatesprobahlyspend over90% of theirtimereviewing material testedonthe
CPA exam. Much more timeshouldbeallocatedto workingpreviousexamination questions. Workingexamination
questionsserves.twofunctions. First,ithelpsyoudevelopasolutionsapproachas well assolutionsthatwill maximize
yourscore. Second,it providesthe best testofyourknowledgeofthematerial.
Themultiple-choicequestionsand answerexplanationscanbe usedin many ways. First, they may be used asadiag
nosticevaluationofyourknowledge. Forexample,before beginningtoreviewauditsamplingyou may wish to answer
10to 15multiple-choicequestionstodetermineyourabilitytoanswerCPA examinationquestionson auditsampling.
Theapparentdifficultyofthe questionsand the correctnessofyouranswerswill allowyou todeterminethe necessary
breadthanddepthofyourreview. Additionally,exposuretoexaminationquestionspriortoreviewand studyofthe ma
terialshouldprovidemotivation. You willdevelopafeel foryourlevelof proficiencyand anunderstandingofthe scope
anddifficultyofpast examinationdiagnostic multiple-choicequestions. Moreover,yourreview materialswill explain
conceptsencounteredin the diagnosticmultiple-choicequestions.
Second,the multiple-choicequestionscan be usedas apoststudyorpostreviewevaluation. You shouldattempttoun
derstandallconceptsmentioned(evenin incorrect.answers)as you answerthe questions. Refertothe explanationof the
answerfordiscussionofthe alternativeseven.though you selectedthecorrectresponse. Thus,you shouldread the expla
nationofthe unofficialanswerunlessyoucompletelyunderstandthequestionand all ofthe alternativeanswers.
Third,you may wishto usethe multiple-choicequestionsasaprimarystudyvehicle. Thisisprobablythequickestbut
leastthoroughapproach inpreparingfortheexam. Makea sincereefforttounderstand thequestionand toselecttheCOf
rectresponsebeforereferring to the unofficialanswerandexplanation. In manycases,theexplanationswillappearin
adequate becauseofyourlackoffamiliaritywiththetopic. Alwaysrefer backto an appropriatestudysource,suchasthe
outlinesandtext in this volume,yourauditingtextbook, AICPApronouncements,etc.
Themultiple-choicequestionsoutnumberthe task-basedsimulationsby greaterthan 10to Iinthis book. Thisissim
ilarto thecontentofthe newcomputer-basedexamination. Oneproblemwithso manymultiple-choicequestionsis that
you may overemphasizethem. Candidatesgenerallypreferto workmultiple-choicequestionsbecausetheyare
1. Shorterand less time-consuming
2. Solvablewith lesseffort
3. Less frustrating-than task-basedsimulations
Chapter1: BeginningYourCPAReview Program 9
Anotherproblemwiththe large numberofmultiple-choicequestionsis thatyou may tend to becomeoverly familiar
with the questions. Theresult maybe that you begin reading thefacts and assumptionsofpreviouslystudiedquestions
intothe questionson yourexamination. Guardagainst this potential problem by readingeachmultiple-choicequestion
withextracare.
Beginningwith the introduction ofthe computer-basedexamination, the AICPA begantestingwithsimulations. Sim
ulations released by the AICPA, prepared bythe author, and revised from priorCPA exam problemsare incorporated in
the modulestowhich they pertain.
Thequestionsand solutions inthis volumeprovideyou with anopportunity todiagnoseand correctanyexam-taking
weaknessespriorto sitting forthe examination. Continually analyzeyourincorrectsolutionstodetermine the causeof
the errorrs)during yourpreparation for theexam. Treat each incorrectsolution as a mistake thatwill not be repeated (es
peciallyon the examination). Alsoattempttogeneralizeyour weaknesses so that you maychange.reinforce,ordevelop
DCW approachestoexampreparationand examtaking.
Afteryou have reviewed for theAuditingand Attestation sectionofthe exam, work the completeAuditingand Attes
tation SampleExamprovidedin AppendixA.
SELF-STUDYPROGRAM
CPAcandidatesgenerallyfind itdifficult[0organizeandtocompletetheirownself-studyprograms. A majorprob
lem isdetermining whatandhow tostudy. Anothermajorproblemisdeveloping the self-disciplinetostickto astudy
program. Relatedly,it is oftendifficultforCPAcandidatestodetermine howmuch tostudy(i.e., determining when they
aresufficientlyprepared).
Thefollowingsuggestions willassist you indeveloping asystematic,comprehensive,and successful self-studypro
gram tohelpyou complete the Auditingand Attestationexam. Rememberthat theseareonly suggestions. Youshould
modify themto suityourpersonality,availablestudytime, and otherconstraints. Someofthesuggestions may appear
trivial,butCPAcandidatesgenerallyneed all the assistancetheycan gettosystemize theirstudyprograms.
Study Facilities and AvailableTime
Locatestudyfacilities that willbeconduciveto concentratedstudy. Factors which you shouldconsiderinclude
1. Noisedistraction
2. Interruptions
3. Lighting ,
4. Availability (e.g., a local library isnotavailable at5:00a.m.)
5. Accessibility (e.g..yourkitchen table vs.yourlocal library)
6. Deskor tablespace
You will probably find different studyfacilitiesoptima! for differenttimes(e.g., your kitchen table duringearly morning
hoursand local librariesduringearlyevening hours).
Nextreviewyourpersonal and professionalcommitmentsfrom now until the examto determine regularlyavailable
studytime. Formalizea scheduleto which you canreasonablycommityourself. At theendofthis chapteryou will find
adetailedapproach to managingyourtime available for the exampreparationprogram.
Self-Evaluation
TheCPAEXAMINATIONREVIEW: AUDITINGANDA1TESJ:4TIONself-studyprogramispartitionedintoeight
topicsor modules. Sinceeachmoduleisclearlydefinedand shouldbestudiedseparately,you have the taskofpreparing
for theAuditingand Attestationexamby tacklingeight manageabletasks. Partitioning the overall projectintoeight
modulesmakespreparationpsychologicallyeasier,sinceyousenseyourselfcompletingonesmallstepatatime rather
thanseeminglynevercompletingoneor afew largesteps.
By completingthefollowing"PreliminaryEstimateofYourPresentKnowledgeofSubject"inventory,organized by
theeightmodulesin this program,you willtabulateyourstrongand weakareasat thebeginningofyourstudyprogram.
Thiswillhelpyou budgetyourlimitedstudytime. Notethatyou shouldbeginstudyingthematerial ineachmoduleby
answering upto 1/4ofthe total multiple-choicequestionscoveringthatmodule'stopics. Seeinstruction4.A. in thenext
section. This"mini-exam"shouldconstituteadiagnosticevaluation asto the amountofreviewand studyyou need.
10 Chapter1: BeginningYourCPA ReviewProgram
PRELIMINARYESTIMATEOFYOURPRESENTKNOWLEDGEOFSUBJECT
Fairly Generally Not
No. Module Proficient Proficient Familiar Familiar
I Professional Responsibilities
2 EnaaeementPlanningandAssessingRisk
3 UnderstandingInternalControl and AssessingControl Risk
4 RespondingtoRiskAssessment
5 Reporting
6 Accountingand ReviewServices
7 AuditSampling
8 Auditinzwith Technology
TimeAllocation
Thestudy program belowentailsan averageof75 hours(Step5. below)ofstudy time. Thebreakdownoftotalhours
is indicatedinthe leftmargin.
[2 1/2hrs.] 1. StudyChapters2-4in this volume. Thesechaptersareessentialtoyourefficientpreparation
program. (Timeestimateincludescandidate's reviewoftheexamplesofthe solutionsapproach
inChapters2and 3.)
[1/2hr.] 2. Begin bystudyingthe introductorymaterialat the beginningofChapter5.
3. Studyone moduleat atime. Themodulesare listedaboveinthe self-evaluationsection.
4. Foreachmodule
[8 hrs.] A. First, review thelistingofkey terms atthe endofthe module. Thenwork l/4ofthe multiple
choicequestions(e.g., if thereare40multiple-choicequestionsin amodule, you shouldwork
every4th question). Scoreyourself.
Thisdiagnosticroutine willprovideyou withan indexofyourproficiencyandfamiliarity
with the typeanddifficultyofquestions.
Timeestigiate: 3minuteseach,nottoexceed 1hourtotal.
[33 hrs.] B. Studytheoutlinesandillustrations. Wherenecessary, refertoyourauditing textbookand
original authoritativepronouncements(thiswill occurmorefrequentlyfortopicsinwhich
you haveaweak background). The outlines foreach moduleare brokenintosmallersections
thatreferyou to multiplechoicequestionsto test yourcomprehensionofthe material. You
may find this organizationusefulinbreakingyourstudyinto smallerbites.
Timeestimate: 3hours minimumpermodule with more time devotedto topicsless familiar
toyou.
e.
[16 hrs.] Workthe remaining multiple-choicequestions. Study the explanationsofthe multiple-choice
questionsyou missedor had troubleanswering.
Timeestimate: 3minutestoanswereachquestionand 2minutestostudytheanswer
explanationofeachquestionmissed.
[8hrs.] D. Workatleast 12task-basedsimulations. Workadditionalproblemsas time permits.
Timeestimate: 10-15 minutesforeachsimulationand 10minutestoreview the answerfor
eachproblemworked.
[7hrs.] E. Work throughthesampleCPAexaminationpresentedat the end ofthis text. Theexam
shouldbetakenin onesitting.
Taketheexamination undersimulatedexamconditions(i.e., inastrangeplacewithother
peoplepresent[yourlocalmunicipal libraryor acomputerlab]). Applyyoursolutions
approachtoeachquestionand yourexamstrategyto the overallexam.
You shouldlimitYourselftothe time thatyouwill havewhen takingthe actual CPAexlllTI
section(4hoursfortheAuditingand Attestation section). Spendtimeafterwardsgrading
yourworkandreviewingyoureffort.
Timeestimate: Totakethe examandreviewit later, approximately7hours.