Final answer:
An entity's control activities include policies and procedures like segregation of duties, information processing, and performance reviews, but not external auditor's tests of controls, which are performed by independent parties.
Step-by-step explanation:
The student's question refers to an entity's control activities which are part of internal control systems in business and accounting. Control activities include a range of policies and procedures to ensure that an entity's goals are achieved, and includes mechanisms such as:
- Segregation of duties, which ensures that no single individual has control over all phases of a transaction.
- Control over information processing to ensure that the data is processed correctly.
- Conducting performance reviews to check the performance against budgets or forecasts.
The external auditor's tests of controls do not fall under the entity's control activities as these are conducted by an independent auditor, and are therefore not controlled by the entity being audited.