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AICPA American Institute of
Certified Public Accountants
Required Communication
of Material Weaknesses
in Internal Accounting Control1
1. This Statement establishes a requirement that the auditor communicate
to senior management and the board of directors or its
audit committee material weaknesses in internal accounting control2
that come to his attention during an examination of financial
statements made in accordance with generally accepted auditing
standards. 3 Except for certain modifications to the form of report,
1 This Statement amends SAS No. 1, section 640.01, and SAS No. 1, section
320.68, by the addition of the following sentence:
If the auditor is aware of a material weakness in internal accounting control,
whether or not he is specifically engaged by the client to review and
report on the system of internal accounting control, a communication as
described in SAS No. 20, " Required Communication of Material Weaknesses
in Internal Accounting Control," is required.
This Statement also revises sections 640.12 and 640.13 of SAS No. 1. See
Appendix for revised wording.
2 A material weakness in internal accounting control is defined in SAS No. 1,
section 320.68, as " a condition in which the auditor believes the prescribed
procedures or the degree of compliance with them does not provide reasonable
assurance that errors or irregularities in amounts that would be material
in the financial statements being audited would be prevented or detected
within a timely period by employees in the normal course of performing
their assigned functions."
3 See also SAS No. 10, " Limited Review of Interim Financial Statements,"
which states: " If the system of internal accounting control appears to contain
weaknesses that do not permit preparation of interim financial information
in conformity with generally accepted accounting principles, and, as a
consequence, it is impracticable for the accountant to effectively apply his
knowledge of financial reporting practices to the interim financial informa-mation,
he should advise the board of directors of the circumstances."
Copyright © 1977 by the
American Institute of Certified Public Accountants, Inc.
1211 Avenue of the Americas, New York, N. Y. 10036
Statement on
Auditing Standards
Issued by the Auditing Standards Executive Committee
August 1977 20
