Discuss AICPA CPA-Auditing Exam Topic 1 Question 107

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.

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).

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33 comments · newest first

Victor 10 months ago

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

Lauran 11 months ago

I thought control activities were only about financial reporting.

Dannette 11 months ago

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

Malcom 11 months ago

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

Brittney 11 months ago

Control activities help ensure management directives are followed.

Haydee 12 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.

Santos 12 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?

Katina 12 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.

Antonio 1 year 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.

Weldon 1 year 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.

Herminia 1 year ago

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

Dorethea 1 year 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.

Kayleigh 1 year 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.

Tennie 1 year ago

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

Viola 1 year ago

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

Salome 1 year ago

↳ replying to Viola

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

Shasta 1 year ago

↳ replying to Viola

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

Carissa 1 year ago

↳ replying to Viola

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

Talia 1 year ago

↳ replying to Viola

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

Sheridan 1 year 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.

Mariann 1 year 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.

Emeline 1 year ago

↳ replying to Mariann

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

Glory 1 year ago

↳ replying to Mariann

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

Anisha 1 year ago

↳ replying to Mariann

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

Antonio 1 year 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!

Aliza 1 year ago

↳ replying to Antonio

Auditors have to be thorough in their assessments.

Joye 1 year ago

↳ replying to Antonio

It definitely streamlines the audit process.

Cecily 1 year ago

↳ replying to Antonio

Yeah, it saves time and helps with overall understanding.

Chaya 1 year ago

↳ replying to Antonio

I know, it's efficient to learn about multiple components at once.

Pete 1 year ago

Wait, so control activities aren't just about financial reporting? I thought they were all about making sure the numbers add up!

Noel 2 years ago

But isn't it important to understand control activities for each account balance?

Helga 2 years ago

I agree with you, control activities are about management directives.

Candra 2 years ago

I think the answer is B.

AICPA CPA-Auditing Exam - Topic 1 Question 107 Discussion