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3. Briefly define a significant deficiency and a material weakness. Explain if/when these would be reported to those charge w

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Answer #1

SAS Number 115 AU Section 325
Communicating Internal Control related matters identified during audit

A deficiency in the internal controls due to which there is a reasonable possibility that a material misstatement in the financial statements cannot be prevented or detected is known as MATERIAL WEAKNESS.

A deficiency in the internal controls which is less extreme than the material weakness but is important enough to be brought under the knowledge of the management is known as SIGNIFICANT DEFICIENCY.

All material weaknesses and significant deficiencies MUST be communicated to the management and the audit committee in writing.

The communication shall be made prior to the issuance of Audit Report on Financial Statements.

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