© D.L. Crumbley
PCAOB provides several strong indicators that material weaknesses exist in internal controls:
Ineffective oversight of the company’s external financial reporting and internal control over financial reporting by the company’s audit committee.
Material misstatement in the financial statements not initially identified by the company’s internal controls.
Significant deficiencies that have been communicated to management and the audit committee but that remain uncorrected after a reasonable period of time.
Source: PCAOB Briefing Paper, Proposed Auditing Standards, October 7, 2003.