Gail Is Auditing the Financial Statements of Hoefener Home Improvements

question 121

Multiple Choice

Gail is auditing the financial statements of Hoefener Home Improvements, a publicly held company. Gail notes several deficiencies in internal control, and is trying to determine whether each deficiency constitutes a significant deficiency or a material weakness. Which best describes the framework Gail should use in making this evaluation?

• A) A significant deficiency exists for weaknesses that are important enough to merit the attention of those responsible for financial reporting, and a material weakness exists when there is a reasonable possibility of material misstatement.
• B) A significant deficiency exists when there is more than a remote chance of a more than inconsequential misstatement, and a material weakness exists when there is more than a remote chance of a material misstatement.
• C) A significant deficiency exists when there is more than a remote chance of a more than inconsequential misstatement, and a material weakness exists when there is a reasonable possibility of material misstatement.
• D) A significant deficiency exists for weaknesses that are important enough to merit the attention of those responsible for financial reporting, and a material weakness exists when there is more than a remote chance of a material misstatement.

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Definitions:

Positive Habits

Regularly practiced behaviors or routines that have a beneficial impact on an individual's mental or physical well-being.

Five Steps

A structured approach or process broken down into five stages to achieve a particular goal or solve a problem.

Gender Bias

A predisposition or inclination that leads to unfair treatment or judgement based on an individual's gender.

Linguistic Style

The unique way in which an individual uses language, including choice of words, tone, pace, and use of metaphors, which can influence communication and perception in social interactions.