Simons Inc. (SIM or the “Company”) is a U.S. public company that files quarterly and annual reports with the Securities and Exchange Commission (SEC). SIM is a leading online store serving customers the United States. SIM offers customers a variety of products,including office supplies, tools, appliances, electronics, and other items. SIM’s supply chain is managed through a single warehouse and distribution facility located in Detroit,Michigan.

SIM has a centralized accounting and finance structure at its corporate headquarters, where all processes and controls related toall substantive account balances occur, including controls. SIMdeals with many vendors, and Cost of Goods Sold for the Company primarily consist of inbound freight and costs relating to purchasing and receiving, inspection, depreciation, warehousing,internal transfer, and other costs of distribution.

SIM sells to their customers under freight on board (FOB)shipping point terms. Therefore, revenue is recorded when goods are shipped from the respective warehouse. SIM currently uses a sophisticated warehouse management system (SELLANDSHIP) whichallows the Company to (1) record sales upon shipment of goods outof the warehouse, (2) automatically price sales based on standardpricing tables, and (3) generate multiple reports for theevaluation of SIM’s operations.

Engagement Team Note: Materiality was determined to be $4.42million. In planning the current year’s audit, the engagement teamobtained an understanding of the internal controls related tore venue. This understanding was done through the engagement team's walkthrough of the revenue process. As part of their walkthrough procedures the engagement team made inquiries of the appropriate personnel, inspected relevant documentation, and in some instances,observed the control performers performing the control procedures.

As a result, the engagement team arrived at the conclusion that there have been no significant changes in the revenue process sincethe prior year. Furthermore, the engagement team has determined that they will not be using the work of others for testing theoperating effectiveness of controls related to revenue.

The engagement team identified three risks of material misstatement relating to the recording of sales. For each risk identified, the team documented in the excerpted worksheet (see Handout 1) the control activity that addresses the risk of material misstatement, the evaluation of the design of that controlactivity, and the planned testing of operating effectiveness.

In addition, the engagement team identified four risks ofmaterial misstatement relating to the cash disbursements process(see Handout 2). During their testing, the engagement team noted acontrol deficiency for Control C5C - The accounts payable department is required to complete the following for each Vendor Change Form requesting a bank account change:

The Company’s control description regarding the Controller's review of the Vendor Change Form is not prescriptive regarding thespecific attributes of the review. However, there is a presumption that the Controller would understand the primary objective of thecontrol, which is to evaluate whether the AP Manager obtained enough information to confirm that the bank account change requestwas authentic.

Answer this question: Is the vendor request change form failure indicative of a material weakness in internal control over financial reporting? Explain your answer with relevant guidance