A significant deficiency of such magnitude that internal control components do not reduce the risk of detection or prevention of material misstatement to an acceptably low level is called a(an)
A)Material weakness and significant deficiency.
B)System design deficiency.
C)Unacceptable reportable condition.
D)Audit alert item.

Question

Quizplus · Accepted Answer

A significant deficiency that is so serious that internal controls cannot mitigate the risk to an acceptable level is referred to as a material weakness. However, if internal controls can reduce the risk to an acceptable level, but not to the desired level, it is referred to as a significant deficiency. Therefore, option A, Material weakness and significant deficiency, best describes the scenario described in the question. The other options are not appropriate definitions of the given scenario.

A Significant Deficiency of Such Magnitude That Internal Control Components