 in this presentation we will review internal control deficiencies and then discuss the communication process for those first a word from our sponsor yeah actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us but but that's okay whatever because our merchandise is is better than their stupid stuff anyways like our crunchy numbers is my cardio product line now i'm not saying that subscribing to this channel crunchy numbers with us will make you thin fit and healthy or anything however it does seem like it works for her just saying so yeah subscribe hit the bell thing and buy some merchandise so you can make the world a better place by sharing your accounting instruction exercise routine if you would like a commercial experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com internal control deficiencies so first we'll go through the definitions we've seen this in prior presentation so i'll go through this a little bit more quickly control deficiencies are when the design of operation of controls does not allow management or employees to prevent or detect misstatements on a timely basis in the normal course of performing their functions then we have the significant deficiencies a step up significant deficiencies is one control deficiency or a combination of control deficiencies in internal control over financial reporting that is less severe than a material weakness but important enough to merit attention by those responsible for oversight of the company's financial reporting internal control deficiencies control deficiencies can be serious enough to be more than a significant deficiency also being considered a material weakness so the next step up is a material weakness in the system of the internal control so if we have a material weakness that of course is a more severe problem a material weakness are a deficiency or a combination of deficiencies in icfr resulting in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis orders must consider two dimensions of the control deficiency so the two dimensions we're going to consider then our likelihood is it reasonably possible and magnitude the material significant or insignificant so when we consider these types of deficiencies we're trying to say we're trying to measure these deficiencies we're trying to say is it likely how likely is this to happen and then we need to think about the magnitude if something were to happen to consider the risk and that is in the consideration of materiality significant or insignificant so here's going to be our table to kind of think about what the action should be what type of communication what should we do with regards to the deficiencies so if we have if it's going to be material but it's remote likelihood of anything happening or if anything is remote we have we're not going to have any action taken if it's remotely likely not likely to happen we're not going to have any action taken if it's reasonably possible or probable and it's going to be material then we have a material weakness in a material weakness that's going to be severe because it's it's reasonably possible or probable and it's material we're going to report it externally to audit committee and to management so we're going to talk to both management and the audit committee in that case if it's not material but significant so it's not material but significant and it's remote nothing if it's reasonably possible or probable significant deficiency that's what we're going to define as then significant deficiency in our table what do we do about it report to the audit committee and to management if it's not material or significant not or or not material or significant keyword or as opposed to one or the other then we're going to say that we have the control deficiency it's going to be a control deficiency and we could simply report that then to management that's the least severe case control deficiency which we can report to management