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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25 days ago

I think the answer is C.

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