You are performing the audit of internal control for Clifton Company. Which of the following would represent a material weakness in internal control?
A) The company's audit committee has experienced unusual turnover of members.
B) The company's CFO was indicted for embezzling from the company.
C) Bank reconciliations are done monthly.
D) The CEO was forced to resign due to an inappropriate relationship with an outside vendor.

Question

Quizplus · Accepted Answer

The embezzlement by the CFO represents a material weakness in internal control as it indicates a significant breakdown in the company's control environment, which enabled the CFO to commit the fraud. This is a serious issue that needs to be addressed by the management and the auditors. Options A, C, and D may be significant issues but they do not necessarily indicate a material weakness in internal control.

You Are Performing the Audit of Internal Control for Clifton