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Per Auditing Standard 5 (AS5), the auditor must evaluate the severity of each control deficiency to determine whether the deficiencies, individually or in combination, are material weaknesses.  The key question to ask is…what parameters should be considered when determining materiality?

In planning and performing the audit, the auditor is not required to search for deficiencies that, individually or in combination, are less severe than a material weakness.  There are several definitions of materiality utilized in the profession that are promulgated by the American Institute of Certified Public Accountants (AICPA), Public Company Accounting Oversight Board (PCAOB), Committee of Sponsoring Organizations (COSO) and others.

This course covers several aspects about the concepts of material weakness and significant deficiency.  We evaluate recent cases of material weakness disclosures and updates from the PCAOB.

 

Learning Objectives

  • Evaluate the various definitions of deficiencies utilized by the Committee of Sponsoring Organizations, Audit Clarity Standard 325 and Auditing Standard 5.
  • Identify methods to assess deficiency impact and distinguish between a significant deficiency and a material weakness.
  • Explore the concept of deficiency aggregation.
  • Explore indicators of a material weakness and examine risk factors for considering the severity of a deficiency through utilization of relevant examples.
  • Examine requirements for deficiency communication.
  • Explore the history of disclosed deficiencies and financial re-statement study.
  • Explore PCAOB current priorities and released updates.
Last updated/reviewed: November 18, 2019

Included In Certifications

This course is included in the following Certification Programs:

17 CoursesSarbanes-Oxley (SOX) Certification

  1. Sarbanes Oxley (SOX) Overview
  2. SOX: Authoritative Bodies
  3. Sarbanes-Oxley (SOX) Standards - Evolution
  4. Information Technology General Controls Primer
  5. COSO 2013 Overview
  6. Sarbanes-Oxley (SOX) Section 404
  7. Sarbanes-Oxley Section 302: ICFR
  8. Sarbanes-Oxley (SOX) And Fraud Sections
  9. Sarbanes-Oxley (SOX) - Top Down Risk Assessment Part 1
  10. Sarbanes-Oxley (SOX) - Top Down Risk Assessment Part 2
  11. Sarbanes-Oxley (SOX) - Entity Level Controls
  12. Sarbanes-Oxley (SOX) Identifying and Documenting Controls
  13. Sarbanes-Oxley (SOX) Testing
  14. Sarbanes-Oxley (SOX) - Information Technology Controls
  15. Sarbanes-Oxley (SOX) - Assessing Material Impact
  16. XBRL - Connection to SOX 302/404 and Critical Roles
  17. Tools For Sarbanes-Oxley Compliance

49 Reviews (202 ratings)Reviews

5
Anonymous Author
love this author. smart content. smart questions
4
Anonymous Author
This is a good course. It provides a lot of helpful information. The examples provided are hrlpful for the better understanding of the topics. The time allotted is about right and the materials used are good. The instructor displayed that she is very knowledgable of the topics discussed all throughout the session.
5
Anonymous Author
Comprehensive overview of SOX discussion of determination of internal control deficiencies and classification as to significant or material weakness. Use of several examples helped drive home the often times subjective nature of these determinations and critical factors to evaluate.
4
Anonymous Author
Another great course from Lynn Fountain with regard to internal control. Full of guidance as well as real world situations. Feedback from PCAOB study was an excellent wrap up to this course.
5
Anonymous Author
This was a helpful discussion about the difficulties in how to classify deficiencies as significant and whether they aggregate to a material weakness. I found the actual examples helpful.
4
Anonymous Author
Good course that provided interesting examples to help both illustrate the differences been a MW & SD and provide further insight into specific cases of organizations' recent MWs.
5
Anonymous Author
This course was great at explaining why the determination of materiality is not always easy. The real-life examples were great and were a great addition to the presentation.
4
Anonymous Author
This course included more examples of applying the concepts than prior courses which is very helpful. Course provides concepts that I really did not think about.
5
Anonymous Author
Great thorough overview of evaluating deficiencies - I really appreciated how Lynn used multiple examples to help one gain a better understanding on this area.
5
Member's Profile
This session is well organized and gives a thorough review of auditors' and management's responsibility and recent trends in assessment and reporting of ICFR.
5
Anonymous Author
Overall the course was a great overview of evaluating deficiencies. The instructor provides great detail on how to distinguish between a SD and a MW.
4
Member's Profile
Good course with a lot of useful information. Examples really helped understand difference between material weakness and significant deficiency
5
Member's Profile
I like the way Lynn organized the course. It surprised how much I still have to learn about SOX. Anyone teaching auditing would benefit.
5
Member's Profile
Great course. The instructor did a great job giving a good overall knowledge of material weaknesses from SOX. Great job teaching!
5
Anonymous Author
Very good information, glad I took this course. Engaging instructor and relevant slides, will keep information for later use.
4
Member's Profile
A good outline to determine the severity of control failures. There were good real life examples of failures illustrated.
5
Anonymous Author
Really enjoy this instructor's courses related to SOX. She seems really knowledgeable and provides practical examples.
5
Anonymous Author
Very informative course on material weaknesses and significant deficiencies and the differences between the two.
5
Member's Profile
Great course! The information is presented in a manner that is easy to understand. Examples are very helpful.
5
Member's Profile
I enjoyed the course.I also struggled with the questions. Overall it was an excellent delivery again by Lynn.
5
Anonymous Author
This course brings clarity to a tough subject and helps seasoned accountants build on their knowledge base.
5
Anonymous Author
I liked very much the examples that were introduced by the trainer as it gave more insight to the topic.
4
Member's Profile
This training helped to solidify concepts that I have dealt with before but did not fully conceptualize.
4
Member's Profile
Overall great webinar. It would be helpful to reduce the number of abbreviations in the slides though.
5
Member's Profile
Very important reminders and technical guidance on what to do when evaluating control deficiencies.
5
Anonymous Author
Well structured review that includes several examples that illustrate the topics under discussion.
5
Anonymous Author
This was a great refresher on what the best way to articulate the differences between a SD and MW.
4
Member's Profile
This course was very informative and gave a good comparison to identify between an SD and a MW.
5
Member's Profile
I beleive I learned a lot from this course and I am thankful I took the time to learn about it.
5
Anonymous Author
This course was excellent and provided important information that I will utilize in the future.
5
Member's Profile
Yet another great course. I've taken all of Lynn's SOX classes and they have all been great.
5
Anonymous Author
Very interesting class. Really appreciated the examples to assist in my understanding
5
Anonymous Author
Believed course was presented well and met objectives. Good coverage of subject matter.
5
Anonymous Author
This another excellent course from an amazing instructor. You won't be disappointed.
5
Member's Profile
This course was a great refresher on some of the challenges associated with SOX.
3
Member's Profile
Describing significant recents developments in material weakness and deficiancy
5
Member's Profile
Excellent review of deficiency impacts and logic from the PCAOB, SEC and AICPA.
5
Member's Profile
It is a very good overview of Audit requirements, SOX and Material Impacts
5
Anonymous Author
Great course for current SOX relevancy and its impact on an organization.
4
Member's Profile
Good information, easy to understand. Overall enjoyed the whole course.
5
Anonymous Author
this course was great and helped better my understanding of the subject
4
Member's Profile
Great recap about Material Weakness and Deficiency aggregation.
4
Anonymous Author
The illustrations were easy to understand and very useful.
4
Anonymous Author
This was a great course with a lot of useful information.
5
Anonymous Author
Great review of SOX materiality concepts and definitions.
5
Member's Profile
Nice overview of assessing severity of deficiencies.
4
Anonymous Author
A lot of very helpful information in this course.
4
Member's Profile
The examples were very helpful.
4
Anonymous Author
Good

Prerequisites

Course Complexity: Intermediate

No Advanced Preparation or Prerequisites are needed for this course. 

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .

2 QuestionsCourse Questions and Answers

Member's Profile

Where can I find the presentations for this course, please

Member's Profile

Jacqueline: Presentation files are located under "Supporting Materials" for each course.

Course Syllabus
INTRODUCTION AND OVERVIEW
  6:17Introduction to Sarbanes-Oxley (SOX) Difficulty of Assessing Material Impact
Assessing Material Impact
  12:30COSO Major Deficiency
  6:42AU Section 325
  10:08AS5 Definitions
  7:23Assessing Deficiency Impact
  4:33Indicators of Material Weakness
  11:24Examples 1 - 3
  7:41Example 4 Sales Contract
  15:33Recent Material Witnesses
  7:54Deficiency History and Restatement Study
  14:54Earnings Impact on Restatement
CONCLUSION
  2:52Course Summary
Continuous Play
  1:47:50Sarbanes-Oxley Difficulty of Assessing Material Impact
SUPPORTING MATERIALS
  PDFSlides: Difficulty of Assessing Material Impact
  PDFDifficulty of Assessing Material Impact Glossary/Index
REVIEW and TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM