Significant deficiency in internal control
A significant deficiency is a single weakness or a combination of
weaknesses in the internal controls associated with financial reporting, that is
less severe than a material control weakness and yet is sufficient to merit the
scrutiny of those responsible for administering an entity's financial reporting.
The presence of such a deficiency does not mean that a material misstatement
has occurred, but it indicates the possibility of such an occurrence in the future.
A company’s external auditors will make management aware of any significant
deficiencies they find [Accounting Tools].
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
misstatements on a timely basis.
A deficiency in design exists when:
- a control necessary to meet the control objective is missing or
- an existing control is not properly designed so that, even if the
control operates as designed, the control objective would not be
met.
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
[PCAOB].
Significant deficiency definition. Accounting Tools. Retrieved from: https://www.accountingtools.com/articles/significant-deficiency
An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements. PCAOB. Retrieved from: https://pcaobus.org/oversight/standards/archived-standards/pre-reorganized-audi ting-standards-interpretations/details/A