09 -- Internal Control Communications

09 -- Internal Control Communications - CPA AUDITING -...

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CPA AUDITING - STUDY UNIT 9 Internal Control Communications: Core Concepts A. Auditors must communicate significant deficiencies and material weaknesses in internal control identified during an audit. The communication is required to be in writing to management and to those charged with governance (e.g., board of directors). However, the auditor is not required to perform procedures specifically to identify deficiencies in internal control. 1. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. This deficiency can be with either the design or operation of the control. 2. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a financial statement misstatement that is more than inconsequential will not be prevented or detected. An inconsequential misstatement is clearly one that is immaterial both
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09 -- Internal Control Communications - CPA AUDITING -...

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