What are the two general internal control deficiencies?

What are the two general internal control deficiencies?

• A. Reportable Condition and Material Weakness
• B. Significant Finding and Critical Flaw
• C. Control Deficiency and Material Lapse
• D. Risk Gap and Compliance Issue

Answer: (A)

Internal-control deficiencies are described by how severe they are. The two general categories used here are a reportable condition and a material weakness. A reportable condition is a deficiency, or a combination of deficiencies, in internal control that is important enough to merit attention by those charged with governance, but it does not indicate a high likelihood that a material misstatement could go undetected. A material weakness is a deficiency, or a combination of deficiencies, that results in a reasonable possibility that a material misstatement in the financial statements will not be prevented or detected on a timely basis. These two terms together capture the spectrum of deficiencies from noteworthy but not catastrophic to critical for financial reporting. Other terms you may encounter describe more specific levels, but the two general categories emphasized here are these.

Internal-control deficiencies are described by how severe they are. The two general categories used here are a reportable condition and a material weakness. A reportable condition is a deficiency, or a combination of deficiencies, in internal control that is important enough to merit attention by those charged with governance, but it does not indicate a high likelihood that a material misstatement could go undetected. A material weakness is a deficiency, or a combination of deficiencies, that results in a reasonable possibility that a material misstatement in the financial statements will not be prevented or detected on a timely basis. These two terms together capture the spectrum of deficiencies from noteworthy but not catastrophic to critical for financial reporting. Other terms you may encounter describe more specific levels, but the two general categories emphasized here are these.