Final answer:
True. The appropriate test of controls for separation of duties is ordinarily restricted to the auditor's observations of activities and discussions with personnel.
Step-by-step explanation:
The statement that the appropriate test of controls for separation of duties is ordinarily restricted to the auditor's observations of activities and discussions with personnel is True. When auditing the controls related to the separation of duties, auditors typically rely on their observations of employees' activities and conversations with personnel to assess whether the duties are adequately segregated.
They may observe employees performing their duties, review documentation, and interview personnel to gather sufficient evidence. For example, an auditor may observe that a cashier is responsible for handling cash receipts and recording transactions, while another employee is responsible for reconciling bank statements. This separation of duties helps reduce the risk of fraud or errors.