Final answer:
A deficiency that presents a reasonable possibility of significant misstatement in financial statements, but is not material, is classified as B) a significant deficiency.
Step-by-step explanation:
The student's question pertains to the classification of a deficiency concerning financial statement misstatements. The correct answer is B) a significant deficiency. This is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. An insignificant deficiency is smaller in scale and does not warrant the same level of attention, while a probable deficiency is not an officially recognized term in the context of financial reporting and internal controls.