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.

More On This Topic

Link to This Definition
Did you find this definition of MATERIAL WEAKNESS helpful? You can share it by copying the code below and adding it to your blog or web page.
Written and fact checked by The Law Dictionary