Question

A control deficiency that is less severe than a material weakness, but important enough to merit attention by those responsible for oversight of the company's financial reporting is referred to as a(n):

A. Control deficiency.
B. Inherent limitation.
C. Reportable deficiency.
D. Significant deficiency

Answer 1

A control deficiency less severe than a material weakness but notable enough for oversight concern is called a Significant deficiency (option D). It requires management's attention and is less critical than a material weakness but more so than an ordinary control deficiency or inherent limitation.

Step-by-step explanation:

A control deficiency that is less severe than a material weakness, but important enough to merit attention by those responsible for oversight of the company's financial reporting is referred to as a Significant deficiency. This term reflects an issue within a company's internal control over financial reporting that is less severe than a material weakness, yet it still requires the attention of the company's management and the audit committee. It's not as minor as a control deficiency that could be inconsequential, nor is it a reportable deficiency that mandates disclosure under financial reporting frameworks. Unlike an inherent limitation, which is an unavoidable limitation that a financial reporting and internal control system might have, a significant deficiency requires attention to prevent potential misstatements in financial statements.