- A control is designed, implemented or operated in such a way that it is unable to prevent, or detect and correct, misstatements in the financial statements on a timely basis; or
- A control necessary to prevent, or detect and correct, misstatements in the financial statements on the timely basis is missing.
Indicators of significant deficiencies include:
- Ineffective response to identified significant risks
- evidence of ineffective aspects of control environment.
- Misstatement detected by the auditor’s procedures were not prevented, or detected and corrected by the entity internal control.
- Correction of prior period misstatements arising due to fraud/error.
- Management inability to oversee financial statements preparation;
- Entity’s risk assessment process being ineffective or absent altogether.