Question

A material weakness in internal control represents a control deficiency that

(1) more than remotely adversely affects a company's ability to initiate, authorize, record, process, or report external financial statements reliably.
(2) results in a reasonable possibility that internal control will not prevent or detect material financial statement misstatements.
(3) exists because a necessary control is missing or not properly designed.
(4) reduces the efficiency and effectiveness of the entity's operations

Answer 1

A material weakness in internal control is a significant deficiency that affects a company's ability to produce reliable financial statements and increases the risk of material misstatements.

Step-by-step explanation:

A material weakness in internal control represents a control deficiency that:

1. more than remotely adversely affects a company's ability to initiate, authorize, record, process, or report external financial statements reliably.
2. results in a reasonable possibility that internal control will not prevent or detect material financial statement misstatements.
3. exists because a necessary control is missing or not properly designed.
4. reduces the efficiency and effectiveness of the entity's operations.

In summary, a material weakness in internal control has a significant impact on the reliability of a company's financial statements, increases the risk of material misstatements, and indicates missing or poorly designed controls. It also hampers the efficiency and effectiveness of the company's operations.