Final answer:
A control deviation due to an unauthorized employee performing a control procedure is considered a deficiency in operation. It indicates a failure in the operational effectiveness of the control system, rather than a design issue.
Step-by-step explanation:
A control deviation caused by an employee performing a control procedure that he or she is not authorized to perform is considered a deficiency in operation. This is because authorized execution of controls is a part of the operational effectiveness of a company's internal control system. If an unauthorized individual performs a control activity, it indicates a failure in the operation of the control, not necessarily in the design of the control system itself. It could be a sign of a lack of training, supervision, or a breakdown in the implementation of the control procedures.
Material weakness and significant deficiency are terms that imply a more severe impact or pervasive issue within the internal control system. A deficiency in design, on the other hand, refers to a situation where a necessary control is missing or an existing control is not properly designed to prevent or detect errors in a timely manner. The situation in question does not imply a design issue but rather an operational failure, hence the correct answer is C. Deficiency in operation.