Material Weakness vs. Significant Deficiency

Material Weakness vs. Significant Deficiency

Not all findings are created equal.

The Data

• Significant Deficiencies: ~200,000 occurrences. These are common.
• Material Weaknesses: ~138,000 occurrences. These are serious.

The Definitions

• Significant Deficiency: A deficiency that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. It's a warning.
• Material Weakness: A deficiency such that there is a reasonable possibility that a material misstatement of the entity's financial statements or compliance requirements will not be prevented, or detected and corrected, on a timely basis. It's a siren.

The Takeaway: A Material Weakness suggests your system is broken. A Significant Deficiency suggests your system needs a tune-up. Treat a Material Weakness as a crisis that requires immediate, structural change.