Now let’s define (1) material weaknesses, (2) significant deficiencies, and (3) other deficiencies. A deficiency in operation exists when a properly designed control does not operate as designed or when the person performing the control does not possess the necessary authority or competence to perform the control effectively. A deficiency in design exists when (a) a control necessary to meet the control objective is missing, or (b) an existing control is not properly designed so that, even if the control operates as designed, the control objective would not be met. Definitions of Control WeaknessesĪ deficiency in internal control is defined as follows: A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. Therefore, it’s even more important that these communications be correct.īefore telling you how to distinguish material weaknesses from significant deficiencies, let’s review control weakness definitions. So, communicating control weaknesses can result in disagreements. After all, he controls the design of the accounting system. For instance, a CFO may believe that a material weakness reflects poorly upon him. How do you categorize a control weakness? Is the weakness a material weakness, a significant deficiency or something less? This seems to be the most significant struggle in addressing internal control issues.Īnd if you’ve been in the business for any time at all, you know that management can take offense regarding control weakness communications. In today’s post, I tell you how to understand and communicate material weaknesses and significant deficiencies.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |