Question

Significant deficiencies are defined as conditions that:

A. Could adversely affect the organization's ability to initiate, record, process, and report financial data in the financial statements.

B. Exists when the design or operation of a control does not allow the company's management or employees to detect or prevent misstatements in a timely fashion.

C. Relates to either a necessary control that is missing or an existing control that is so poorly designed that it fails to satisfy the control's objective.

D. Results in a reasonable possibility that a material misstatement exists in financial statements.

Answer 1

Answer: Option A Significant deficiencies are defined as conditions that could adversely affect the organization's ability to initiate, record, process and report financial data in the financial statements. Explanation: Internal Controls are very important for the organization. Internal control system is implemented to safeguard assets from loss, theft or misuse. A strong internal control system will protect organization from loosing of assets or property and safeguard from leakage of valuables of organization. Internal Controls are implemented on financial system of organization assures structured process of recording and safeguarding of financial information of the organization. If there are flaws or significant dificiencies in those internal controls of financials, there will be negative impact on keeping financial information. Significant deficiency means a condition or combination of conditions that could impact the organization's ability to preparing, maintaining and protecting financial information.