Significant deficiencies need to be communicated to the company's audit committee because:
A) they represent material weaknesses that allow fraud to be perpetrated.
B) they represent significant design flaws in internal controls.
C) they represent falsification of accounting records.
D) they represent disclosure of information related to issuance of a "going-concern" opinion.

Question

Quizplus · Accepted Answer

Significant deficiencies represent significant design flaws in internal controls that could result in material misstatements in the financial statements. Therefore, it is important to communicate these deficiencies to the company's audit committee so that they can take appropriate action to address these flaws and improve the effectiveness of the company's internal controls. While fraudulent activities and falsification of accounting records may be a possibility with significant deficiencies, they are not the primary reason for communication. Likewise, the disclosure of information related to the issuance of a "going-concern" opinion may be significant, but not the primary reason for communicating significant deficiencies to the audit committee.

Significant Deficiencies Need to Be Communicated to the Company's Audit