Final answer:
A 'significant deficiency' is an issue within a company's financial processes that could lead to a significant but not material misstatement in the financial statements, distinguishing it from an 'insignificant deficiency' or a 'material weakness'.
Step-by-step explanation:
A deficiency that implies there is a reasonable possibility of misstatement in the financial statements that is significant but not material is known as a significant deficiency. This is a term used in the context of auditing and internal control over financial reporting. It indicates an issue within a company's financial processes that is more severe than an insignificant deficiency due to its potential impact on the financial statements, but not so severe as to constitute a material weakness.
A material weakness is a more serious flaw that suggests that a material misstatement is not only possible but probable, and such a misstatement would be large enough to affect the decision-making of users of financial statements. An insignificant deficiency is minor and would not be expected to significantly affect financial reporting or a company's internal controls. The term probable deficiency is not a standard term used in auditing to describe deficiencies in internal control over financial reporting.