What is Material Weakness?
Material Weakness A deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement will not be prevented or detected, as defined by PCAOB and SEC.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Material Weakness” Used in Practice?
The auditor identified a material weakness in the company’s internal controls that could result in material misstatements of the financial statements.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Material Weakness?
A deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement will not be prevented or detected, as defined by PCAOB and SEC.
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