AICPA Newly Released AUD Simulations

Task 1515_01

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Situation 1: Issue a Disclaimer of Opinion

Failure to furnish the auditor with adequate evidence is a scope limitation. When there
is a scope limitation in an audit of internal controls, the auditor can issue a disclaimer of
opinion or withdraw from the engagement.

Situation 2: Determine if the control deficiency is a material weakness by

obtaining further audit evidence

Control deficiencies can result from deficiencies in the design of an entity’s controls
and/or failures in the operation of an entity’s controls. In this situation, the controls are
operating as designed, so there is no failure in the operation of the controls. However,
a control deficiency exists because there is a deficiency in the design of the controls.
The auditor must determine if the control deficiency is a material weakness by obtaining
further audit evidence.

Situation 3: Express an adverse opinion on the internal controls

In an audit of an entity’s internal control, a material weakness in internal control results

in an adverse opinion.

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Situation 4: Express an unqualified opinion on the internal controls
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In an internal control audit, management is required to provide an assertion about the
effectiveness of the entity’s internal controls. However, management does not provide
assurance about the internal controls. An unqualified opinion is issued If the auditor
does not find any material weaknesses in the entity’s internal controls.
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Situation 5: Express an unqualified opinion on the internal controls

Although last year’s auditor’s report included an adverse opinion on the client’s internal
controls, the client has since modified their internal controls, and the auditor has tested
the effectiveness of these internal controls in the current year’s audt. Because the audit
tests found no material weaknesses in the client’s internal controls, the auditor will
express an unqualified opinion on the internal controls in this year’s auditor’s report.
Tab 1765_01

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Issue 1: Reconciliation was not reviewed in a timely manner.

The bank reconciliation for the period ended December 31, Year 2 was prepared on
January 10, Year 3. Evan Monroe did not review the bank reconciliation until March 2,
Year 3, which was 51 days later.

Issue 2: Reconciliation was not agreed to the bank statement balance at the
appropriate date.

The bank reconciliation was as of December 31, Year 2, but the bank balance was
agreed to the online account balance as of January 3, Year 3.

Issue 3: Reconciliation contains stale checks.

The actual bank reconciliation included a deduction for year 2 outstanding checks dated
March 29, November 30, and December 1, respectively. The check dated March 29 is
unlikely to clear the bank and should be written-off as a stale check.

Issue 4: Reconciliation has unsubstantiated unrecorded items.

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At the very bottom of the bank reconciliation, there were adjustments totaling $5,500
that included a bank fee (amount undisclosed) and unrecorded items (no totals or item
breakdown provided).
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Issue 5: Reconciliation contains aged items that should have been added to the
bank balance.

The bank reconciliation had 2 deposits in transit that were added to the balance per
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bank. While an argument can be made that the December 28,Year 2 deposit was still in
transit at year-end, the second deposit, dated October 25, Year 2, should have been
recorded by the bank at year-end.

Issue 6: Reconciliation balance was not properly agreed to the December 31

general ledger balance.

The bank reconciliation, dated as of December 31, Year 2, was improperly agreed to
the general ledger on January 1, Year 3. While these dates are only 1 day apart and
January 1 is a U.S. legal holiday, there could be transactions that posted the following
day. The reconciliation should agree balances to the same date.
Tab 3749_01

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Updated auditor’s report, change in audit opinion
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