AICPA CPA-Auditing Exam - 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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Carissa

3 months ago

C is about internal control deficiencies causing misstatements.

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Izetta

3 months ago

Definitely not A or B, those are more serious issues.

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Jolanda

3 months ago

Wait, are we sure about that? Seems a bit vague.

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Ulysses

4 months ago

Totally agree, option C is spot on!

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Coral

4 months ago

Significant deficiencies relate to internal control issues, right?

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Felicia

4 months ago

I definitely recall that significant deficiencies are tied to internal controls, so I would go with C as the best choice here.

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Lovetta

4 months ago

I’m a bit confused; I thought significant deficiencies were more about fraud or illegal acts. Could it be option B?

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Jillian

4 months ago

I remember a practice question that mentioned deficiencies leading to misstatements, so I’m leaning towards option C.

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Helene

5 months ago

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

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Angelyn

5 months ago

This is a good test of my auditing knowledge. I'll review the key characteristics of significant deficiencies and then choose the option that aligns best with the definition.

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Han

5 months ago

I'm a little confused by the question. Can someone clarify what exactly "significant deficiencies" are referring to? I want to make sure I understand the concept before selecting an answer.

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Joesph

5 months ago

Okay, I think I've got this. Significant deficiencies are related to internal control issues that could lead to material misstatements. Option C looks like the best answer.

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Karon

5 months ago

Hmm, I'm a bit unsure about this one. The wording is a bit technical, so I'll need to think it through carefully.

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Hildred

5 months ago

This question seems straightforward. I'll carefully read through the options and select the one that best matches the definition of significant deficiencies.

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Denna

10 months 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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Joni

8 months ago

Yes, identifying and addressing deficiencies in internal control is crucial for ensuring the accuracy and reliability of financial statements.

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Gearldine

8 months ago

Absolutely, it's important for auditors to communicate significant deficiencies to management and governance to address any potential issues.

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Murray

9 months 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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Sharika

10 months ago

Ooh, a trick question! They're all significant, but C is the only one that specifically mentions the auditor's responsibility to communicate weaknesses in internal control.

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Jade

9 months ago

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

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Lai

9 months ago

B) Material fraud or illegal acts perpetrated by high-level management.

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Stephaine

9 months ago

A) Disclosures of information that significantly contradict the auditor's going concern assumption.

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Carolynn

10 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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Fausto

8 months ago

User 3: It's all about being proactive and ensuring the accuracy of the financial statements.

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Ammie

9 months 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

10 months ago

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

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Arminda

10 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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Raylene

10 months ago

B seems like the right answer to me. Material fraud or illegal acts by top management are definitely significant issues that need to be reported.

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Sena

9 months ago

I think both B and C could be considered significant deficiencies that require reporting.

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Barney

9 months ago

That's true, those could also be significant deficiencies that need to be communicated.

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Cordelia

9 months ago

But what about deficiencies in internal control that could lead to misstatements?

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Linn

9 months ago

I agree, material fraud by top management is a serious issue.

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Socorro

10 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

9 months 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

10 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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