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AICPA CPA-Auditing Exam - Topic 3 Question 108 Discussion

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:
B) Material fraud or illegal acts perpetrated by high-level management.
A) Disclosures of information that significantly contradict the auditor's going concern assumption.
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.
D) Manipulation or falsification of accounting records or documents from which financial statements are prepared.

AICPA CPA-Auditing Exam - Topic 3 Question 108 Discussion

Actual exam question for AICPA's CPA-Auditing exam
Question #: 108
Topic #: 3
[All CPA-Auditing Questions]

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:

Show Suggested Answer Hide 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
7 months ago
C is about internal control deficiencies causing misstatements.
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Izetta
8 months ago
Definitely not A or B, those are more serious issues.
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Jolanda
8 months ago
Wait, are we sure about that? Seems a bit vague.
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Ulysses
8 months ago
Totally agree, option C is spot on!
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Coral
8 months ago
Significant deficiencies relate to internal control issues, right?
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Felicia
9 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
9 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
9 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
9 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
9 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
9 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
9 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
9 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
9 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
1 year 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
1 year 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
1 year 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
1 year 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
1 year 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
1 year 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
1 year ago
B) Material fraud or illegal acts perpetrated by high-level management.
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Stephaine
1 year ago
A) Disclosures of information that significantly contradict the auditor's going concern assumption.
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Carolynn
1 year 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
1 year ago
User 3: It's all about being proactive and ensuring the accuracy of the financial statements.
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Ammie
1 year 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
1 year ago
User 1: I agree, it's important to communicate any deficiencies in internal control.
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Arminda
1 year 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
1 year 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
1 year ago
I think both B and C could be considered significant deficiencies that require reporting.
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Barney
1 year ago
That's true, those could also be significant deficiencies that need to be communicated.
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Cordelia
1 year ago
But what about deficiencies in internal control that could lead to misstatements?
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Linn
1 year ago
I agree, material fraud by top management is a serious issue.
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Socorro
1 year 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
1 year 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 year 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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Freeman
1 year ago
I'm not sure, but I think it's between C and D.
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Cristy
1 year ago
I agree with Arletta, deficiencies in internal control can cause misstatements.
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Arletta
1 year ago
I think the answer is C.
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