1. According to PCAOB Auditing Standard (AS 2201) (https://pcaobus.org/Standards/Auditing/Pages/AS2201.aspx), what factors should auditors consider when evaluating the severity of a deficiency in a control that directly addresses a risk of material misstatement?
2. PCAOB AS 2201 distinguishes the difference between a deficiency in design and a deficiency in operation. Does the Assistant Controllerâ€™s failure to adequately review the Vendor Change Form represent a deficiency in the design or operating effectiveness of the control?
3. Based on guidance in AS 2201, determine if the failure in the vendor request change form control indicative of a material weakness in internal control over financial reporting.
4. SEC Regulation S-K requires that management provide a report on a registrantâ€™s ICFR in the companyâ€™s Form 10-K. Assuming the company and the auditor concluded that this internal control failure indicates a material weakness in internal control, what information would the company be expected to disclose?
5. In light of the identified deficiency, auditors should consider a possibility that the deficiency may have an impact on other controls, and/or the similar problem may exist in other controls. What implications does the failure to adequately review the Vendor Change Form have on other controls?