Discussion Post
Watch the two vignettes on Evaluating Root Cause and Severity of a Control Deficiency. The vignettes depict a situation where an audit engagement team found an internal control deficiency while investigating a misstatement auditors found. The first vignette is a discussion about the root cause of the misstatement, and the second one is about whether the internal control deficiency identified should be 'material weakness' or something less severe than that. It is a critical decision to make as existence of material weakness in internal control will lead to a modified audit opinion on internal control.
Select 'two' of the following questions and discuss:
a) A misstatement of an account balance does not always lead to a conclusion there is an internal control deficiency. What made auditors in this case consider the possibility the error was a result of a problem in internal control?
b) The audit partner in the first vignette asks whether the issue is a deficiency in design or in operating effectiveness. Why is it important?
c) In the second vignette, why does the partner seem pretty convinced the deficiency is severe enough to be a material weakness?
d) In the second vignette, two auditors sitting in front of the partner seem a little reluctant to conclude the deficiency is a material weakness. Why do you think it is the case?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.