Watch the two vignettes on Evaluating Root Cause and Severity of a Control Deficiency. The vignettes depict a situation where an audit engagement team found an internal control deficiency while investigating a misstatement auditors found. In both vignettes, the audit manager and the audit senior are meeting with the audit partner to discuss the problem. The first vignette is a discussion about the root cause of the misstatement, and the second one is about whether the internal control deficiency identified should be 'material weakness' or something less severe than that. It is a critical decision to make as existence of material weakness in internal control will lead to a modified audit opinion on internal control. Initial/Original Post Discuss all four questions below: https://www.thecaq.org/vignette-2-evaluating-root-cause-and-severity-control-deficiency/.

1. In the first vignette, the audit partner in the first vignette asks whether the control issue is a deficiency in design or in operating effectiveness.

2. Explain in your own words the answer that the audit manager and the audit senior gave to the partner and the reason why they drew that conclusion. In the second vignette, why does the partner seem pretty convinced the deficiency is severe enough to be a material weakness?

3. In the second vignette, two auditors sitting in front of the partner seem a little reluctant to conclude the deficiency is a material weakness. Why do you think it is the case?

4. The PCAOB requires public companies (=issuers) to have the internal control system over financial reporting audited (in addition to the audit of financial statements). Is it possible that a company receives 'an adverse audit opinion on internal control over financial reporting' but 'an unqualified (=clean) opinion on financial statements' in the same year? Explain your answer.