Inadequate segregation of duties

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Reference no: EM134044

Question :

Subsequent are examples of control deficiencies that may represent important deficiencies or material weaknesses. For each of the subsequent scenarios, indicate whether the deficiency is a major deficiency or material weakness. Justify your decision.

a. During its assessment of ICFR, the management of Lorenz Corporation and its auditors recognized the subsequent control deficiencies that individually represent significant deficiencies:

• Inadequate segregation of duties over certain information system access controls.

• Various instances of transactions that were not properly recorded in subsidiary ledgers. While the transactions that weren't recorded properly were not material, the gross amount of the transactions of that type totaled up to an amount numerous times materiality.

• A lack of timely reconciliations of the account balances affected by the indecently recorded transactions.

b. During its assessment of ICFR, management of First Coast BankCorp and its auditors recognized the following deficiencies that individually show significant deficiencies: the design of controls over the estimation of credit losses (a critical accounting estimate); the operating effectiveness of controls for initiating, reviewing and processing adjustments to the allowance for credit losses; and the operating effectiveness of controls designed to prevent and identify the improper recognition of interest income. In addition, in the past year, First Coast experienced a important level of growth in the loan balances that were subjected to the controls governing credit loss estimation and revenue recognition, and further growth is expected in the upcoming year.

Reference no: EM134044

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