ICFR Deficiency Evaluation & Remediation – From Detection to Correction
Why Deficiency Evaluation Matters
Identifying and fixing gaps in your ICFR framework is just as important as building controls. If a key control fails or isn’t performed consistently, it creates a financial reporting risk that must be evaluated and addressed, before auditors or regulators find it.
How Deficiencies Are Classified
|
Type |
Description |
Example |
Disclosure Requirement |
|
Control Deficiency |
Minor issue with low impact |
One missed approval on a low-risk transaction |
Internal action only |
|
Significant Deficiency |
Important weakness worth board-level attention |
Repeat issues with payment approvals or reconciliations |
Report to Audit Committee |
|
Material Weakness |
High likelihood of material misstatement |
Revenue booked without delivery across multiple periods |
Must be disclosed publicly (for PJSCs) |
Evaluation Criteria
To classify a control failure:
- Assess the nature of the affected account or assertion
- Evaluate the likelihood and magnitude of error
- Check if there are any compensating controls
- Consider whether the issue is isolated or recurring
UAE Regulatory Context
- SCA Decision 2/RM of 2024 requires material weaknesses to be disclosed by PJSCs starting from 2025
- Auditors will issue an ICFR opinion, including commentary on identified deficiencies
- CBUAE mandates insurers to track and report remediation progress
- Corporate Tax audits may review control gaps affecting revenue, cost, or intercompany data integrity
|
Step |
Description |
|
Root Cause Analysis (RCA) |
Identify why the control failed—design flaw, training issue, system limitation |
|
Action Plan |
Define steps to fix or redesign the control |
|
Assignment & Deadline |
Allocate responsibility and timelines |
|
Retesting |
After implementation, test the control again for effectiveness |
|
Documentation & Sign-off |
Maintain proof of resolution and share updates with auditors/committee |
Best Practices for Deficiency Management
- Maintain a Deficiency Register with priority levels
- Flag recurring failures for enhanced scrutiny
- Use a remediation tracker with owner, timeline, status
- Communicate issues early to Internal Audit and Compliance
- Retest controls before year-end audit or regulatory submission
How Crowe Can Help
We assist in:
- Root cause analysis and remediation planning
- Drafting deficiency and remediation logs
- Redesigning weak controls
- Facilitating re-testing and documentation
- Preparing reporting packs for auditors, SCA, or CBUAE
Coming Next Week:
Next week, we’ll conclude the series with ICFR Reporting and Certification, how to prepare year-end reporting packs, issue management assertions, and ensure readiness for external audit and regulatory sign-off.
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