You're the senior auditor on a new client. The client is a moderate-sized merchandising company. As part of your review of the client's system of internal controls you note that:

1. Cash receipts are not always deposited on a timely basis. (You noted several examples where cash was deposited 4 days after receipt.)

2. Inventory is not counted periodically.

3. No one reviews the account distributions in the purchases journal when the accounting manager takes his two-week vacation each year.

Which of the above would most likely be considered a material weakness?

Explain your answer. 

    a) is it reasonably possible that an error could occur?

    b) could the error could be material?

Answer rating: 100% (QA)

In internal control a material weakness is a serious deficiency in the controls that would not prevent or detect a misstatement that could be material ... View the full answer