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 an 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 retired after twenty years of service to the company.

Question

Quizplus · Accepted Answer

A material weakness in internal control is a deficiency or combination of deficiencies in internal control that results in a reasonable possibility of a material misstatement in the financial statements not being prevented or detected in a timely manner. The embezzlement by the CFO indicates a significant control deficiency and a material weakness. The turnover of audit committee members, monthly bank reconciliations, and CEO retirement do not necessarily indicate a material weakness in internal control.

You Are Performing the Audit of Internal Control for Clifton