Reportable Condition
Financial Dictionary — Auditing & Internal Control
Definition
is a matter coming to the auditor’s attention relating to SIGNIFICANT DEFICIENCIES in the design or operation of the entity's internal control that could ADVERSLY AFFECT an entity’s ability to fulfill future obligations with customers and/or the satisfaction of liabilities.
Use cases, Example & Why it matters
Use cases
- Used in audit planning to understand risks and design procedures.
- Used during testing (controls/substantive) and documentation of audit evidence and conclusions.
- Used during testing (controls/substantive) and documentation of audit evidence and conclusions.
Example
- Example: The auditor references **Reportable Condition** when designing procedures and documenting conclusions in the audit file.
Why it matters
- Why it matters: Supports high-quality, defensible audit conclusions and helps detect material misstatements and control weaknesses.