When one material weakness is present at the end of the year, management of a public company must conclude that internal control over financial reporting is ineffective.
Material weaknesses can unfavourably influence a company's reputation and, hence, its value. A company's stock cost may drop as a few investors regard the company as a risky investment. Depending on the result of the weakness, the company may use expansive sums to cover legal and extra outside auditing expenses.
A material weakness may be a lack, or a combination of deficiencies, in internal control over financial detailing, such that there's a sensible plausibility that a material error of the company's yearly or between times financial statements will not be anticipated or identified on a timely premise.
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