You Are the Audit Manager for a New Audit Client

question 33

Essay

You are the audit manager for a new audit client. Your staff auditors are unsure of what constitutes a control deficiency. Discuss the terms control deficiency, design deficiency, and operating deficiency.

---

Definitions:

Parent Company

A company holding a sufficient amount of another firm's voting shares to influence or determine its board of directors, thereby controlling its management and operational decisions.

Incentives

Benefits or rewards offered to encourage specific actions or behaviors.

Divisional Conflict

Conflicts that arise within sections of an organization, often due to differing objectives, resources, or priorities.

Information Flow

The transfer and communication of data and knowledge among people, systems, or organizations, facilitating decision-making and coordination.