Question

According to PCAOB AS 2201, deficiencies related to ICFR should be evaluated based on which two criteria?

a. activity and complexity
b. consistency and severity
c. likelihood and magnitude
d. relevance and faithful representation

Answer 1

Deficiencies in internal control over financial reporting should be evaluated based on likelihood and magnitude according to PCAOB AS 2201, which helps in assessing the potential impact on financial statements.

Step-by-step explanation:

According to PCAOB AS 2201, deficiencies related to ICFR (Internal Control over Financial Reporting) should be evaluated based on two criteria, which are likelihood and magnitude. Likelihood refers to the probability that a deficiency could result in a misstatement of the company's financial statements, while magnitude relates to the size and potential impact of the misstatement. This assessment helps in determining whether the deficiencies represent a material weakness in the internal control system.