What is the definition of _and_quot;Material Weakness_and_quot;? 866

  • I am really a beginner to learn about SOX. Could you please explain the definition of ‘Material Weakness’ with examples? Thank you very much.

  • From AUDITING STANDARD No. 2 An Audit of Internal Control Over Financial Reporting Performed in Conjunction with An Audit of Financial Statements:
    A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
    In determining whether a control deficiency or combination of deficiencies is a significant deficiency or a material weakness, the auditor should evaluate the effect of compensating controls and whether such compensating controls are effective.
    The objective of the audit of internal control over financial reporting is to obtain reasonable assurance that no material weaknesses exist.

  • thank you very much.

  • You are very welcome.

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