Question

Which of the following is least likely to represent a material weakness in internal control for Flynt Corporation?

1) Flynt Corporation's computer systems were not working properly for two days; consequently, employees needed to do all reconciliations manually.
2) Flynt Corporation's CFO was arrested last year for embezzling money from the entity.
3) For the current year, the auditor found a material misstatement in Flynt's sales recognition that was undetected by the internal controls.
4) Flynt's audit committee is deemed to be ineffective.

Answer 1

Option 1 is the least likely to represent a material weakness in internal control for Flynt Corporation because the computer system issue was temporary and does not directly indicate a significant deficiency given no stated impact on financial reporting.

Step-by-step explanation:

The question is asking to identify which scenario is least likely to represent a material weakness in internal control for Flynt Corporation. A material weakness is a deficiency, or a combination of deficiencies, in internal control that there is a reasonable possibility that a material misstatement of the company's financial statements will not be prevented or detected on a timely basis.

1. Flynt Corporation's computer systems not working properly for a short duration does not inherently indicate a material weakness, especially if there is no evidence of a significant impact on financial reporting.
2. If the CFO was arrested for embezzlement, that directly suggests that there is a material weakness in internal control over financial reporting.
3. A material misstatement in revenue is clearly indicative of a material weakness in internal control over financial reporting because the internal controls failed to detect it.
4. An ineffective audit committee is a sign of a material weakness because it may be unable to oversee the financial reporting and internal control processes effectively.

Therefore, option 1 is the least likely to represent a material weakness because the malfunction of the computer system was temporary and there's no information given that it led to a significant impact on financial reporting.