Is it true that AD groups are created in a downstream application and managed within that application?

The statement is incorrect because Active Directory (AD) groups are typically created and managed within Active Directory itself rather than in a downstream application. In the context of identity management, "downstream application" refers to systems that consume or use identity information from the identity provider (like Okta) rather than being the primary source.

AD serves as a directory service that controls access and provides user management, so any groups or memberships are established and maintained within that AD environment. While some applications may utilize or depend on AD groups for permissions or access control, they do not create or manage those groups themselves. Instead, they would leverage the existing groups defined in AD to enforce security policies.

This distinction is essential for managing identities, as it delineates the responsibilities between an identity provider (like Okta or Active Directory) and the applications that utilize that identity information for their operations.