What is MATERIAL WEAKNESS?

If the internal checks and balances put in place by a firm are inadequate in discovering errors and preventing them from occurring again, failures that could occur could potentially lead to a misrepresentation of data. In accounting practices, this is an ineffective system. The services of other management officials may be needed to properly resolve the problem. A company runs the risk of damaging its future data regarding earnings and expenses if a material weakness is not properly addressed.

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