[Anonymous]

Can somebody explain the diffeence between the two? Does a material weakness result in adverse whereas significant deficiency does not have to be adverse?

[msgolds]

@buddy1981, I know it is a confusing concept, but think about it like this. A material weakness is a deficiency in internal control that increases the likelihood of a potential misstatement. A significant deficiency is an internal control deficiency that is less likely to have adverse effects on the financial statements than a material weakness, but still merits attention from those charged with governance. So a material weakness is a bigger deficiency, and a signifcant deficiency is smaller. Both types of deficiencies should be communicated to those charged with governance, but only material weaknesses need to be reported in an Audit of Internal Controls. Neither will necessarily result in an adverse opinion in an Audit of Financial Statements. Weak internal controls does not imply that financial statements are misstated.

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[Anonymous]

Thanks that makes sense.

[Author]

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