Final answer:
An auditor would report deficiencies in internal controls to management and governance, include them in written reports, and may need to reassess the audit's scope. In cases of material weaknesses, they might issue an adverse opinion. The 2008-2009 recession highlighted the importance of timely action to prevent losses.
Step-by-step explanation:
After discovering a significant amount of deficiencies in internal controls during an audit, an auditor would take various steps to address them. Firstly, they would communicate these deficiencies to management and those charged with governance in written reports. These reports would detail the nature of the deficiencies and the potential impact on the financial statements. Auditors would also provide recommendations for improving the internal controls.
Additionally, if the deficiencies are considered material weaknesses, auditors may be required to express an adverse opinion on the effectiveness of internal controls over financial reporting. They may also need to reassess the audit scope and perform additional audit procedures to gain reasonable assurance that the financial statements are free of material misstatement. In accordance with regulations, such as those established by laws passed in the 1990s, auditors are generally expected to ensure that their findings regarding internal controls are communicated to the appropriate parties and to follow up on these findings.
It's noteworthy that questions have been raised about the efficacy of regulation and the foresight of regulators, especially in light of the 2008-2009 recession that impacted many U.S. banks. This historical context underscores the importance for auditors and regulators to act diligently and swiftly upon identifying deficiencies to prevent significant financial losses and maintain trust in the financial system.