There are a significant number of intercompany transactions monthly. The transactions are related to transfers of inventory between warehouses and the allocation of marketing costs between the business units. The intercompany transactions are frequently material. There is a formal management policy that requires monthly reconciliation of the intercompany accounts; however, there is no process to ensure that the procedures are performed consistently. The result is a lack of timely reconciliations, and differences in intercompany accounts that are frequent and significant. you must state explicitly whether each transaction is material weakness or significant deficiency. You must say why it is one or the other.

The question is: you must state explicitly whether each transaction is material weakness or significant deficiency for the above internal control finding.