AICPA CPA-Auditing Exam - Topic 1 Question 107 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 107
Topic #: 1

Which of the following is not true with respect to the control activities of an entity?

AControl activities are the policies and procedures that help ensure that management directives are carried out.

BControl activities are the policies and procedures that help ensure that the financial statements are fairly presented in conformity with generally accepted accounting principles.

CAn understanding of control activities may be obtained while the auditor is obtaining an understanding of the other components of internal control.

DAn understanding of control activities does not require an understanding of control activities related to each account balance included in the financial statements.
Explanation
Choice 'b' is correct. Control activities are the policies and procedures that help ensure that management directives are carried out. These policies and procedures may relate to any of the three objectives (financial reporting, operations, and compliance), not strictly to the financial reporting objective.
Choice 'a' is incorrect. Control activities are defined as the policies and procedures that help ensure that management directives are carried out.
Choice 'c' is incorrect. As an auditor obtains an understanding about the other components of internal control, he or she is also likely to obtain some knowledge about control activities.
Choice 'd' is incorrect. Ordinarily, audit planning does not require an understanding of control activities related to each account balance, transaction class, and disclosure component.

Show Suggested Answer

Suggested Answer: B

Choice 'b' is correct. Any report issued on significant deficiencies should indicate that providing assurance on internal control was not the purpose of the audit.

Choice 'a' is incorrect. The auditor should communicate significant deficiencies to management and those charged with governance, but is not required to request a meeting with management one level above the source of the reportable conditions, to discuss suggestions for remedial action.

Choice 'c' is incorrect. Significant deficiencies discovered and communicated at an interim date do not need to be reexamined with tests of controls before completing the engagement.

Choice 'd' is incorrect. Suggestions concerning administration efficiencies and business strategies may be communicated in the same report with significant deficiencies (the significant deficiencies must be separately identified, however).

by Annelle at Feb 09, 2025, 06:01 PM

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Victor

4 months ago

Seems like a lot to keep track of, but I get it!

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Lauran

5 months ago

I thought control activities were only about financial reporting.

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Dannette

5 months ago

Wait, so we don't need to know about every account balance? That seems off.

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Malcom

5 months ago

Totally agree, that's a key part of internal controls!

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Brittney

5 months ago

Control activities help ensure management directives are followed.

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Haydee

5 months ago

I’m a bit confused about choice C. I thought understanding control activities was part of the overall internal control assessment, but I’m not entirely sure how that fits in.

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Santos

6 months ago

I vaguely recall that control activities help with compliance and operations too, not just financial reporting. So, I guess that makes choice B true?

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Katina

6 months ago

I think choice D sounds wrong because understanding control activities is important for each account balance, right? I feel like I saw a similar question in our practice exams.

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Antonio

6 months ago

I remember that control activities are crucial for ensuring management directives are followed, but I'm not sure if they relate to all objectives or just financial reporting.

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Weldon

6 months ago

This is a good opportunity to demonstrate my knowledge of internal control components. I feel confident I can identify the option that is not true about control activities.

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Herminia

6 months ago

The wording of these options is tricky. I'll need to double-check my understanding of control activities before answering.

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Dorethea

6 months ago

Okay, I think I've got a handle on this. Control activities are about ensuring management directives are carried out, not just about financial reporting. I'll select the option that doesn't align with that.

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Kayleigh

6 months ago

Hmm, I'm a bit unsure about the differences between the options. I'll need to carefully read through each one to make sure I understand the nuances.

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Tennie

6 months ago

This question seems straightforward. I'll focus on identifying the option that is not true about control activities.

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Viola

11 months ago

Forget the exam, I'm just impressed that the question used the phrase 'management directives' without any mention of the word 'synergy'.

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Salome

10 months ago

I agree, it's a nice change from the usual buzzwords.

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Shasta

10 months ago

It's refreshing to see a question without the usual corporate jargon.

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Carissa

10 months ago

I can't believe they didn't throw in 'synergy' for good measure.

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Talia

10 months ago

I know, right? 'Management directives' without 'synergy' is a rare sight.

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Sheridan

11 months ago

An understanding of control activities for each account balance? That sounds like a recipe for information overload. I'm happy they don't require that level of detail.

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Mariann

11 months ago

I'm glad the explanation clarified that control activities aren't limited to financial reporting. That would've been a tricky one to remember on the exam.

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Emeline

10 months ago

Definitely, control activities play a key role in ensuring that everything is running smoothly within an entity.

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Glory

10 months ago

Yeah, it's important to understand how management directives are carried out through control activities.

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Anisha

10 months ago

I agree, it's good to know that control activities cover more than just financial reporting.

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Antonio

12 months ago

Huh, I didn't realize an auditor can get an understanding of control activities while learning about the other internal control components. That's kinda like a two-for-one deal!

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