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CMA Intermediate · Corporate Accounting and Auditing · Report on Internal Financial Control over Financial Reporting

During an IFC audit, the auditor of Kaveri Textiles Ltd finds a deficiency which, individually, is less severe than a material weakness yet important enough to merit attention by those responsible for oversight. Under the Guidance Note, this is termed a:

This is a significant deficiency. It is less serious than a material weakness but still important enough to be brought to the attention of those charged with governance. A compensating control only mitigates a weakness, and inherent limitations are general constraints on any control system.

  1. ASignificant deficiencyCorrect
  2. BInherent limitation
  3. CControl objective
  4. DCompensating control

Explanation

A significant deficiency is a deficiency or combination of deficiencies that is less severe than a material weakness but important enough to merit attention of those charged with governance. A compensating control merely offsets a weakness.

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