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With respect to the audit of a nonissuer, 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:
Suggested Answer: D
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Choice 'd' 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. Manipulation or falsification of accounting records may not represent an internal control deficiency (e.g., if such fraud occurs through collusion).
Choice 'b' is incorrect. Information indicative of a going concern problem is not an internal control deficiency.
Choice 'c' is incorrect. Irregularities or illegal acts may not represent deficiencies in internal control (e.g., if such acts occur through collusion).
35 comments · newest first
EL
Eloisa
10 months ago
Really? I thought it was more about fraud and manipulation.
JO
Josephine
11 months ago
D is definitely the right choice here.
DA
Dannie
11 months ago
Wait, are we sure it's not about high-level management's actions?
CA
Carey
11 months ago
Totally agree, it's about the design or operation of controls!
AR
Armanda
11 months ago
Significant deficiencies are all about internal control issues.
MI
Miesha
12 months ago
I definitely recall that significant deficiencies should be communicated, and it seems like option D fits best since it talks about internal control deficiencies.
VI
Viola
12 months ago
I’m a bit confused; I thought significant deficiencies were more about illegal acts or fraud, but now I’m not so sure.
GE
Georgiann
12 months ago
I think I saw a similar question where we had to identify what constitutes a significant deficiency, and I feel like it was about internal controls causing misstatements.
YU
Yuki
1 year ago
I remember studying that significant deficiencies relate to internal controls, but I'm not sure if it's specifically about design or operation.
RA
Raul
1 year ago
Ah, this is a tricky one. I know significant deficiencies have to do with internal control, but I'm not totally clear on how that differs from the other options. I'll make sure to review that concept before the exam.
BO
Bok
1 year ago
Hmm, I'm a bit unsure on this one. The options seem pretty similar, and I want to make sure I really understand the difference between significant deficiencies and the other types of issues. Let me re-read the question carefully.
RO
Rodrigo
1 year ago
This question seems straightforward - I think the answer is D, deficiencies in internal control that could lead to misstatements. I'll double-check the definitions, but that's my initial take.
EU
Eulah
1 year ago
Okay, I think I've got it. The key is that significant deficiencies are specifically about internal control issues that could reasonably lead to misstatements, not just any irregularities or illegal acts. D seems like the best answer here.
FR
Francine
2 years ago
I'll go with D, but only if the auditor can do it without setting off any alarms in the finance department. We don't need another Enron situation on our hands, am I right? Maybe they can just slip it in the report under 'minor recommendations'.
CH
Chantell
2 years ago
Kina: Let's make sure the auditor handles it discreetly.
KI
Kina
2 years ago
Definitely, we don't want to cause any unnecessary panic.
HI
Hildred
2 years ago
I agree, we have to be careful with how we communicate these deficiencies.
MI
Mitzie
2 years ago
Hmm, I'm torn between B and D. Discrepancies with the going concern assumption are pretty serious, but I guess weaknesses in internal controls that could lead to misstatements are even more pressing. Better not to take any chances, right?
TI
Titus
2 years ago
Marcos: Definitely, accuracy is key in auditing.
JO
Jonell
2 years ago
Yeah, it's better to be safe than sorry when it comes to financial statements.
MA
Marcos
2 years ago
I agree, it's important to address deficiencies in internal controls.
VI
Vincent
2 years ago
I think D is the correct answer. Weak internal controls can cause misstatements.
TE
Teddy
2 years ago
D seems like the obvious choice here. Auditors need to identify and report on those pesky internal control issues before they become a bigger problem. Though I do wonder if the definition of 'non-inconsequential' is as clear-cut as it sounds.
FL
Flo
2 years ago
Definitely, addressing internal control issues promptly can help maintain the integrity and accuracy of the financial reporting process.
AY
Ayesha
2 years ago
I agree, it's important to catch those deficiencies early on to prevent any potential misstatements in the financial statements.
LE
Leandro
2 years ago
D seems like the obvious choice here. Auditors need to identify and report on those pesky internal control issues before they become a bigger problem.
EM
Emiko
2 years ago
I'm not sure, but I think it's between C and D.
LA
Lashawn
2 years ago
I'm going with C. If high-level management is up to no good, that's definitely something the auditor needs to communicate to the appropriate parties. Can't have those corporate fat cats getting away with anything!
ST
Stacey
2 years ago
Option D sounds about right. Significant deficiencies in internal control are a big deal, even if they don't lead to material misstatements. Gotta keep those auditors on their toes!
JO
Jolanda
2 years ago
It's all about maintaining the integrity and accuracy of the financial statements.
ER
Erasmo
2 years ago
Definitely, it helps ensure that any issues are addressed and corrected in a timely manner.
DA
Daniel
2 years ago
Agreed, it's important for auditors to communicate these deficiencies to management and those charged with governance.
GL
Glory
2 years ago
Option D sounds about right. Significant deficiencies in internal control are a big deal, even if they don't lead to material misstatements.
ME
Melita
2 years ago
I agree with Florencia. Significant deficiencies are related to internal control.
FL
Florencia
2 years ago
I think the answer is D.