Unremediated Significant Deficiencies 1994



  • Can anyone share some advice on year to year (first year to second) significant deficiencies that have not been satisfactoraly resolved. Does a significant deficiency become a material weakness automatically if no action has been taken by management and the situation that led to the SD has not changed?
    Thanks



  • Does a significant deficiency become a material weakness automatically if no action has been taken by management and the situation that led to the SD has not changed?

    No, I can’t see why this would be the case. At worst it would still be an SD provided that the materiality hasn’t changed.



  • An unremediated significant deficiency does not automatically become a material weakness. The tone at the top, however, can be brought into question if such a defiency remains unresolved and over time this itself may be interpreted as a material weakness.



  • It could, but there are many valid reasons you could have for an deficiency being unremediated e.g. dependent on system change.



  • Here is a quote from AS2 Para 140

    Each of the following circumstances should be regarded as at least a significant deficiency and as a strong indicator that a material weakness in internal control over financial reporting exists:
    Significant deficiencies that have been communicated to management and
    the audit committee remain uncorrected after some reasonable period of
    time.



  • Ah, but what is reasonable… 😉



  • Thanks everyone.


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