Final answer:
Auditor Candace must use her professional judgment to assess the severity of the internal control exception to classify it accurately. She evaluates the likelihood and potential impact of the exception without the need to consult the AICPA or legal counsels.
Step-by-step explanation:
When Auditor Candace identifies an internal control exception related to revenues during an audit of Flying Rug Company, she must use her professional judgment to determine whether it is a control deficiency, a significant deficiency, or a material weakness. This involves evaluating the severity of the exception in terms of its likelihood and potential impact on the financial statements. Candace would consider factors like the magnitude of the error, the probability of it leading to a material misstatement, and whether the issue is indicative of a systemic problem. This analysis does not typically require consulting with the AICPA for an opinion, management's legal counsel, or the auditor's legal counsel, as these are steps that may be taken in different contexts.