Вы находитесь на странице: 1из 4

DISCLAIMERS : This is a suggested approach to studying for the Module 3 Exam that you should use

more as a checklist of where you might focus your study/review. It is possible that exam questions will
be taken from any learning objective listed on this guide, also shown in bold in the PowerPoint slides.
Please take note that just because I have indicated certain objectives to be Important! does not mean
that these are the only objectives you will be tested on.

The content of this document is not meant to be all encompassing but to provide a path towards focal
areas. Meaning, use of this guide alone will not be adequate to ensure your success on this exam.
I provide some additional thoughts based on prior student success. The best scenario is that you will
have done all of the following:
 You completed the pre-class readings before class and used the knowledge checks as an indication
of key concepts and topics.
 You attended class and reviewed the PowerPoints (NOTE: PLEASE CHECK WEBCOURSES FOR THE
MOST RECENT VERSIONS OF THE PPTs) which indicate important learning objectives from each
chapter and contain further explanation of key concepts and topics to focus on.
 You re-read the relevant chapters and/or important learning objectives and focus on related
multiple choice questions at the back of the chapter. Practicing the multiple choice questions at the
back of the chapter helps you to train to answer the type of questions you will see on the exam.
 You attend the Module 3 Exam review on April 19th and ask clarification questions.
One of the things that makes this test difficult is the style of exam question. Some of the questions do
ask for best answer which makes them more challenging. Other questions/answers might seem tricky
because one or two words can change the meaning entirely.


Chapter 3: Audit Reports

3-2: Specify the conditions required to issue the standard unmodified opinion audit report.

 Know the difference between a standard unmodified opinion audit report and other reports
(Figure 3-2)
 Know the conditions for issuing an unmodified opinion (also called unqualified, or clean opinion)

3-4: Describe the five circumstances when an emphasis-of-matter explanatory paragraph or non-
standard wording is appropriate.

 Know the situations in which an unmodified opinion is issued with an explanatory paragraph or
modified wording
o Lack of consistent application of GAAP
o Substantial doubt about the entity’s ability to continue as a going concern
o Audit agrees with a departure from GAAP
o Emphasis of other matters (material related parties, subsequent events, matters
affecting comparability with prior year, material litigation or regulatory actions, major
3-5: Identify the types of audit reports that can be issued when an unmodified opinion is not justified. (it
might also help to review 3-7)

 Know the difference between qualified opinions (i.e.overall financial statements are fairly
presented but there scope limitations or GAAP departures), adverse opinions (auditors have
determined financial statements are not fairly presented), and disclaimers (i.e. auditor is unable
to determine if financial statements are fairly presented, or lack of independence) and the
reasons why these opinions might result

Chapter 10: Fraud Risk Assessment (Very Important Chapter)

10-1: Define fraud and distinguish between fraudulent financial reporting and misappropriation of

 Be able to assess different situations as being fraudulent financial reporting, misappropriation of

assets, or not fraudulent.

10-2: Describe the fraud triangle and identify conditions for fraud.

 Understand the components of the fraud triangle (incentives/pressures, opportunities,

attitude/rationalization) and examples of each (Review Table 10-1 and 10-2)

10-3: Understand the auditor’s responsibility for assessing the risk of fraud and detecting material
misstatement due to fraud.

 Identifying and considering fraud risk factors

 Inquiries of management
 Analytical procedures
 Communications among the audit team

10-6: Recognize specific fraud risk areas and develop procedures to detect fraud.

 Understand risks of fraudulent financial reporting in revenue and accounts receivable

10-7: Understand interview techniques and other activities after fraud is suspected.

 Understand how frauds are detected and by who (Review Figure 10-8)
 Understand how auditors response/what auditors do when frauds are detected

Chapter 15: Sampling

15-1: Explain the concept of representative sampling.

 Understand what audit sampling is and why it is needed
 Understand representative sampling, sampling risk and non-sampling risk

15-2: Distinguish between statistical and nonstatistical sampling and between probabilistic and
nonprobablistic sample selection.

 Understand the phases of sampling (plan, select and perform tests, evaluate results)
 Distinguish between statistical versus non statistical sampling

15-3: Select samples using probabilistic and nonprobalistic methods.

 Understand probabilistic sampling methods (simple random, systematic/interval, probability

proportional to size/MUS)
 Understand non probabilistic sample selection methods (haphazard, block, judgemental)

15-5: Use nonstatistical sampling in tests of controls and substantive tests of transactions

 Understand the following concepts: sampling risk (acceptable risk of overreliance, population
size tolerable exception rate, population exception rate and how they affect sample size

Chapter 16: Substantive Testing- Sales/Collections/AR (Very Important Chapter)

16-1: Describe the methodology for designing tests of details of balances using the audit risk model.
16-2: Design and perform substantive analytical procedures for accounts in the sales and collections

 Review the methodology for designing tests of details of balances

 Understand accounts receivable balance related audit objectives
 Understand risk assessment, tests of controls/transactions, analytical procedures, substantive
testing of ending-balances

16-3: Design and perform tests of details of balances for accounts receivable.

 Understand substantive tests performed on sales/accounts receivable: analytical procedures,

review of AR Aging/Aged AR Trial Balance, confirmation of AR, cut-off testing
 Understand substantive tests performed on accounts receivable allowance for uncollectible
accounts and bad debt expense

16-4: Obtain and evaluate accounts receivable confirmations.

 Understand when confirmations are required and for what accounts

 Understand different types of confirmations (positive, blank, negative, invoice)
 Understand sampling decisions surrounding confirmations
 Understand control over confirmations
 Understand alternative procedures and analysis of differences

Chapter 23: Substantive Testing – Cash & Cash Equivalents (p737 -752)

23-2: Show the relationship of cash in the bank to the various transaction cycles.

 Understand cash relationships to other accounts (Review Figure 23-2)

 Understand in the audit of cash – the importance of the bank reconciliation, what it is and what
we can uncover by auditing cash and the bank reconciliation

23-3: Design and perform audit tests of the general cash account.

 Understand in the audit of cash – the importance of the bank reconciliation, what it is and what
we can uncover by auditing cash and the bank reconciliation
o Receipt of a bank confirmation
o Accessing cut-off bank activity after year-end
o Testing the bank reconciliation

Chapter 24: Completing the Audit (Very Important Chapter)

24-2: Conduct a review for contingent liabilities and commitments.

 Distinguish contingent liabilities from commitments.

 Understand the conditions required for contingent liabilities and when we record them in the
financial statements, disclose them, or do nothing.
 Understand how auditors find and evaluate contingencies.

24-4: Conduct post-balance sheet review for subsequent events.

 Define subsequent events and distinguish those that have a direct effect on the financial
statements (require adjustment) versus those that do not (but which may require disclosure).
 Understand how auditors find subsequent events

24-5: Design and perform the final steps in the evidence-accumulation segment of the audit.

 Understand procedures performed to wrap up the audit: final analytical procedures, going
concern evaluation, related party transactions
 Understand the role of the management representation letter

24-6: Integrate the audit evidence gathered and evaluate the overall audit results.

 Understand how auditors consider whether their evidence supports the audit opinion (is
sufficient and appropriate)
 Understand review of audit documentation and engagement quality review.