Question

A material weakness in internal control over financial reporting (ICFR) is defined as _______.

A. A deficiency, or a combination of deficiencies, in internal control over financial reporting.
B. A single deficiency in internal control over financial reporting.
C. Multiple deficiencies in internal control over financial reporting.
D. any account balance that the auditor has concluded is incorrect by more than a predetermined percentage.

Answer 1

A material weakness in internal control over financial reporting (ICFR) is a deficiency, or a combination of deficiencies, in internal control. It can be caused by a single deficiency or multiple deficiencies in internal control and needs to be addressed and disclosed in the financial statements. Option A is correct.

Step-by-step explanation:

A material weakness in internal control over financial reporting (ICFR) is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting. It refers to any weakness in the design or operation of controls that could result in a material misstatement of financial statements. It may occur at the process, transaction, or account balance level.

A material weakness can be caused by a single deficiency or multiple deficiencies in internal control. It is considered a significant issue that needs to be addressed and disclosed in the organization's financial statements.

For example, if a company lacks segregation of duties, where the same person is responsible for both recording and approving transactions, it represents a material weakness in their internal control over financial reporting.