Discuss the Differences Between a Control Deficiency, a Significant Deficiency

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The Answer is Control Deficiency. 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. A design deficiency exists when: (1)a control necessary to meet the relevant control objective is missing or (2)an existing control is not properly designed so that, even if the control operates as designed, the control objective is not always met. A deficiency in operation exists when a control is designed effectively, but is not effectively implemented.
Significant Deficiency. A significant deficiency is a control deficiency, or combination of control deficiencies, in ICFR that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the entity's financial reporting.
Material Weakness. A material weakness is a deficiency, or combination of deficiencies, in ICFR, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Likelihood and Magnitude. According to the above definitions, in judging the significance of a control deficiency, management and the auditor must consider two dimensions of the deficiency: likelihood and magnitude. The definition of material weakness includes the phrase "reasonable possibility." This term is to be interpreted using the guidance in ASC Topic 450, Contingencies. Accordingly, the likelihood of an event is a "reasonable possibility" if it is either reasonably possible or probable. Magnitude refers to the size of the potential misstatement that could occur due to the deficiency. In determining whether it is reasonably possible that a financial statement misstatement resulting from a deficiency is material, the auditor relies on the same concept of materiality as is used in determining financial statement materiality.

Discuss the Differences Between a Control Deficiency, a Significant Deficiency

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