AICPA CPA-Auditing Exam - Topic 1 Question 76 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 76
Topic #: 1

With respect to the audit of a nonissuer, significant deficiencies are matters that come to an auditor's attention, which should be communicated to an entity's management and those charged with governance because they represent:

AMaterial irregularities or illegal acts perpetrated by high-level management.

BDeficiencies in the design or operation of internal control that could reasonably be expected to cause a non-inconsequential misstatement in the financial statements.

CFlagrant violations of the entity's documented conflict-of-interest policies.

DIntentional attempts by client personnel to limit the scope of the auditor's fieldwork.

Show Suggested Answer

Suggested Answer: B

Choice 'b' is correct. Significant deficiencies in the design or operation of internal control should be communicated to management and those charged with governance because there is more than a remote likelihood that they will result in a financial statement misstatement that is more than inconsequential.

Choice 'a' is incorrect. Irregularities or illegal acts may not represent deficiencies in internal control (e.g., if such acts occur through collusion).

Choice 'c' is incorrect. Significant deficiencies do not necessarily involve violations of an entity's conflictof-interest policies.

Choice 'd' is incorrect. Interfering with the auditor's procedures would not constitute a significant deficiency, since such interference would not affect the financial statements.

by Clorinda at Oct 18, 2023, 11:03 AM

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Alona

3 months ago

I thought it was more about intentional scope limitations.

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Carissa

3 months ago

B is definitely the right choice here.

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Vashti

4 months ago

Wait, are we sure it's not just about high-level fraud?

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Santos

4 months ago

Totally agree, it's about potential misstatements!

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Marshall

4 months ago

Significant deficiencies are all about internal control issues.

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Ryan

4 months ago

I feel like I’ve seen something similar before, and it was definitely about internal controls causing misstatements. B seems right to me.

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Flo

4 months ago

I’m a bit confused; I thought significant deficiencies were more about serious issues like illegal acts. Is that not correct?

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Josphine

4 months ago

I remember a practice question that mentioned deficiencies could lead to misstatements, so I’m leaning towards option B.

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Lelia

5 months ago

I think significant deficiencies relate to internal controls, but I'm not sure if it's about design or operation.

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Renato

5 months ago

The question is asking about the definition of significant deficiencies, so I need to carefully consider each option and how it aligns with the information provided. I'll take my time to analyze this thoroughly.

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Shannon

5 months ago

For this type of question, it's important to focus on the key details in the definition. Option B seems to best match the criteria described, so that's likely the correct answer.

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Mary

5 months ago

Hmm, I'm not entirely sure about this one. I'll need to review the definition of significant deficiencies again to make sure I understand the concept.

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Jolene

5 months ago

This is a straightforward question. The definition of significant deficiencies clearly points to option B as the correct answer.

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Leota

5 months ago

This seems straightforward enough. I'll just follow the steps in the instructions and use the tools in the exam panel to identify the dependent cells. As long as I read carefully and don't rush, I think I can handle this.

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Joseph

5 months ago

I remember from our review session that 'persuasive evidence' is about having clear, documented proof. No agreement = no evidence. That points to B for me.

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Onita

5 months ago

This question seems straightforward, I think I can figure it out.

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Jamal

5 months ago

Okay, I think I've got this. Value network mapping focuses on the exchange of value between different entities, which seems relevant for supply chain analysis. I'm going to go with option D.

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Domingo

5 months ago

Hmm, I'm not totally sure about this one. I know statistical process control is used to monitor a process, but I'm not certain if that's the main objective. Let me think this through a bit more.

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