An example of a significant deficiency, as stated by the SEC, would be if a company’s accounting function reviews significant or unusual modifications to the sales contract terms but does not review changes in the standard shipping terms.
What is a significant control deficiency?
A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote …
Which of the following matters would an auditor most likely consider to be a significant deficiency to be communicated to those charged with governance?
Which of the following matters would an auditor most likely consider to be a significant deficiency or material weakness to be communicated to those charged with governance? Evidence of a lack of objectivity by those responsible for accounting decisions. The communication by the auditor must be in writing.
Do you have to disclose a significant deficiency?
A: A registrant is obligated to identify and publicly disclose all material weaknesses. If management identifies a significant deficiency it is not obligated by virtue of that fact to publicly disclose the existence or nature of the significant deficiency.
What is the difference between control deficiency and significant deficiency?
Significant deficiencies are a control deficiency, or combination of control deficiencies, that adversely affect the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with Generally Accepted Accounting Principles (GAAP) such that there is more than a remote …
What can be an indicator of significant deficiencies in internal control?
Indicators of significant deficiencies in internal control include, for example: Evidence of ineffective aspects of the control environment, such as: Misstatements detected by the auditor’s procedures that were not prevented, or detected and corrected, by the entity’s internal control.
Which of the following should the auditor communicate to those charged with governance?
The auditor should also communicate with those charged with governance the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole.
Which is most likely when the assessed level of control risk increases?
After obtaining an understanding of internal control and arriving at a preliminary assessed level of control risk, an auditor decided to perform tests of controls. Which is most likely when the assessed level of control risk increases? Use larger sample sizes for substantive procedures.
When a compensating control exists a weakness in the system?
A compensating control is one elsewhere in the system that offsets the absence of a key control. When a compensating control exists, there is no longer a significant deficiency or material weakness.
Which is the best definition of a deficiency?
A deficiency that implies that there is a reasonable possibility of misstatement in the financial statements that is significant but not material is: A) a material weakness. B) a significant deficiency. C) an insignificant deficiency. D) a probable deficiency.
How are significant deficiencies related to the same set of accounts?
However, each of these significant deficiencies affects the same set of accounts. Taken together, these significant deficiencies represent a more than remote likelihood that a material misstatement could occur and not be prevented or detected. Therefore, in combination, these significant deficiencies represent a material weakness.
What are the major deficiencies in Information Systems?
Based on the context in which the deficiencies occur, management and the auditor agree that these deficiencies individually represent significant deficiencies: • Inadequate segregation of duties over certain information system access controls.
Which is an example of an internal control deficiency?
The likelihood of material misstatement of the financial statements resulting from this internal control deficiency is more than remote (even assuming that the amounts were fully reserved for in the company’s allowance for uncollectible accounts) due to the likelihood of material misstatement of the gross accounts receivable balance.
