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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: September 19, 2018

Included In Certifications

This course is included in the following Expert Certifications:

16 CoursesSarbanes-Oxley (SOX) Certification

  1. Sarbanes Oxley (SOX) Overview
  2. SOX: Authoritative Bodies
  3. The Evolution of Sarbanes-Oxley (SOX) Auditing Standards
  4. Information Technology in Today’s Digital World: General Controls Primer
  5. COSO 2013 Framework Requirements and Implementation Overview
  6. Sarbanes-Oxley (SOX) Section 404
  7. Sarbanes-Oxley (SOX) Section 302: Internal Controls over Financial Reporting
  8. Sarbanes-Oxley (SOX) Section 806, 902, 906
  9. Sarbanes-Oxley (SOX): Preparing for a Top Down Risk Assessment Part 1
  10. Sarbanes-Oxley (SOX): Executing a Top Down Risk Assessment Part 2
  11. Sarbanes Oxley (SOX): Entity Level and Soft Controls
  12. Sarbanes-Oxley (SOX) Identifying and Documenting Controls
  13. Sarbanes-Oxley (SOX) Testing
  14. Sarbanes-Oxley (SOX) General Controls, Applications Controls, and Spreadsheet Controls
  15. Sarbanes-Oxley (SOX) Difficulty of Assessing Material Impact
  16. XBRL - Connection to SOX 302/404 and Critical Roles

16 Reviews (42 ratings)Reviews

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.
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
Great thorough overview of evaluating deficiencies - I really appreciated how Lynn used multiple examples to help one gain a better understanding on this area.
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.
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.
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
This course was very informative and gave a good comparison to identify between an SD and a MW.
5
Member's Profile
Yet another great course. I've taken all of Lynn's SOX classes and they have all been great.
3
Member's Profile
Describing significant recents developments in material weakness and deficiancy
4
Member's Profile
Good information, easy to understand. Overall enjoyed the whole course.
4
Anonymous Author
This was a great course with a lot of useful information.
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 .
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