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Significant Deficiency

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What is the definition of Significant Deficiency?
A control deficiency, or combination of control deficiencies, in a company's financial reporting processes that adversely affects the ability to initiate, authorize, record, process, or report financial data reliably in accordance with Generally Accepted Accounting Principles (GAAP). This deficiency carries a more than remote likelihood that a misstatement of the company's financial statements, which is more than inconsequential, will not be prevented or detected.
Using Significant Deficiency in an Example

A significant deficiency might occur in a company's financial department if the software used for financial reporting lacks adequate controls to verify the accuracy of the data input. This could lead to errors in the financial statements that are significant enough to affect decisions made by users of these statements, such as investors and creditors.

Using Significant Deficiency in a sentence

During the audit, we identified a significant deficiency in our client's inventory tracking system that could potentially lead to material misstatements in the financial reports.

Related Terms

Surviving Spouse

A person whose spouse has died within the tax year and who may file a joint tax return for that year. Additionally, the surviving spouse can file joint returns for the next two years if they remain unmarried and maintain a household as the principal residence for a dependent child.
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Swap

A financial contract in which two parties agree to exchange streams of payments over a specified period, based on different indices such as interest rates, foreign exchange rates, or equity indices, applied to a notional amount. Swaps typically do not involve the exchange of principal.
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