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.
Detailed Explanation
A reportable condition is a significant deficiency in internal control identified by the auditor that should be communicated to those charged with governance.
Common Uses
- 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.
Practical Example
- Example: The auditor references **Reportable Condition** when designing procedures and documenting conclusions in the audit file.
Why This Term Matters
- Why it matters: Supports high-quality, defensible audit conclusions and helps detect material misstatements and control weaknesses.