AICPA Exam CPA-Auditing Topic 3 Question 108 Discussion

Actual exam question for AICPA's CPA-Auditing exam

Question #: 108
Topic #: 3

Significant deficiencies are matters that come to an auditor's attention that should be communicated to an entity's management and those charged with governance because they represent:

ADisclosures of information that significantly contradict the auditor's going concern assumption.

BMaterial fraud or illegal acts perpetrated by high-level management.

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

DManipulation or falsification of accounting records or documents from which financial statements are prepared.

Show Suggested Answer

Suggested Answer: B

Choice 'b' is correct. A stratified sample generally is more efficient than an unstratified sample since the population is classified in a manner that emphasizes the higher dollar value items. The result is an estimate having a desired level of precision with a smaller sample size.

Choice 'a' is incorrect. Both stratified and unstratified MPU may be used for populations where many monetary errors are expected to occur.

Choice 'c' is incorrect. Stratified sampling reduces the variability among items in a stratum.

Choice 'd' is incorrect. Standard deviations measure variability, and stratification would tend to reduce the strata standard deviations as compared to the overall standard deviation of the population.

by Sheldon at Mar 03, 2025, 11:46 PM

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Denna

29 days ago

Elementary, my dear Watson! The answer is clearly C. Anything that could lead to a 'non-inconsequential misstatement' is a big red flag for the auditor.

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Murray

4 days ago

I agree, option C is the correct answer. Deficiencies in internal control can definitely lead to misstatements in the financial statements.

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1 months ago

I'm going with C. Auditors need to communicate internal control weaknesses, even if they don't result in actual misstatements. Better safe than sorry!

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Ammie

1 days ago

User 2: Definitely, even if they don't directly cause misstatements, they could lead to them in the future.

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Zona

29 days ago

User 1: I agree, it's important to communicate any deficiencies in internal control.

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Arminda

1 months ago

Hmm, I'm not sure. D sounds like it could be the answer, as falsification of accounting records is a pretty significant problem.

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2 months ago

I think C is the correct answer. Significant deficiencies in internal control can lead to material misstatements in the financial statements, which is a serious matter that should be communicated.

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Jerry

20 days ago

User 2: I agree. It's important for auditors to communicate significant deficiencies to management and those charged with governance to address any potential issues.

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Lynda

1 months ago

User 1: I think C is the correct answer. Significant deficiencies in internal control can lead to material misstatements in the financial statements, which is a serious matter that should be communicated.

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