Chapter 4 - Audit of Historical Financial Statements (Auditing Specific Financial Statement Cycles and Final Review)

We hope your studies are going well. As we have mentioned, you should be in a good rhythm with the BOOST outlines/videos and with completing the multiple choice and simulations. You are probably overwhelmed by the quantity of information (because it is natural to feel that way) but, as we have said before, you must take this step-by-step!

Related to retaining the material, we hope around the end of your studies for Chapter 3 of BOOST, you took a practice test on the previous material to provide you feedback regarding how well you understand this material and are retaining it. Overall, we believe that your practice tests should be around 80%. If your practice tests are lower than this, the actual score is not the most important item, but rather determining the reason for the score. These reasons can include: (1) not paying enough attention when you read the questions, (2) not understanding the underlying material of the specific topic, (3) not being able to identify the topic of the question, and/or (4) not knowing the rule. How you should adapt your studies depends on the main reason or reasons you identify for the lower score. For example, if it’s reason 2 or 3, then we suggest you go back to the outlines and videos and fix your weak areas. If it is reason 4, then we suggest that you spend a little more time each week getting the material memorized. 

Units 4-1 to 4-7 of Chapter 4 of BOOST cover the financial statement transaction cycles for the revenue, expenditures, cash, inventory, investments, property, plant and equipment, payroll, and financing cycles. These cycles are complex/involved and most CPA candidates have a very limited knowledge of these cycles. In fact, the number one reason CPA candidates fail the audit section of the CPA exam with a grade of 70% to 74% are these financial statement cycles. YOU MUST THOROUGHLY UNDERSTAND THESE CYCLES AND MUST MEMORIZE WHO PERFORMS WHAT AND THE OTHER SPECIFIC RULES! PLEASE DON'T GET FRUSTRATED AND GIVE UP ON THESE CYCLES. WE PROMISE YOU THAT YOU WILL REGRET DOING THAT!! YOU CANNOT CUT CORNERS ON THIS INFORMATION!

The remaining units in Chapter 4 of BOOST cover the final review stage (step #7 in Appendix D of Chapter 2) of an audit of historical financial statements. Thus, at the end of Chapter 4 of BOOST, we will complete our discussion of the audit of historical financial statements.

As we have mentioned already, please don't rush through this material and take your time to understand it. Remember, an additional week of study (if needed) will be well worth it if the additional time is the difference between passing and failing the audit section of the CPA exam! Also, it is significantly more effective and efficient to address weaknesses in a specific topic when working on that topic rather than waiting until final review to address those weaknesses.

Also, when you are close to completing Chapter 4 of BOOST, you should take a practice test (with only multiple choice) for the content noted on page one or two of the document with content comparisons of BOOST and Becker, Roger, or Wiley CPAexcel. This practice test will help you determine how much of the Chapters 1 to 3 BOOST information you have retained and how well you have integrated the various topics in Chapters 1 to 3. You should review your notes (which are a subsection of the BOOST outlines) periodically during the week to keep this information fresh in your mind. 

Good luck as you begin your studies of Chapter 4! Some of the page numbers in the videos are not the same as the page numbers in the BOOST textbook. Please use the page numbers in the BOOST textbook.

Remember, please contact BOOST CPA Review by email if you have any questions as you work through Chapter 4.

AFTER WATCHING EACH VIDEO BELOW, please complete the appropriate multiple choice and simulations related to each of these videos. Please refer to the document with content comparisons of BOOST and Becker, Roger, or Wiley CPAexcel to determine which multiple choice and simulations to complete.

Here are the fourteen videos for Chapter 4 of BOOST:

Given the importance and difficulty of the financial statement transaction cycles, there are two videos for unit 4-4. The outline for the first video for unit 4-4 is in the BOOST textbook. The following is the outline for the second video for unit 4-4 (i.e., the supplemental video). Please download the following outline to use with the unit 4-4 supplemental video (i.e., the second video): BOOST CPA Review-Audit-unit 4-4-supplement-6-18-2021.pdf