Discussed tax vs financial accounting. A concept introduced this week is material weakness. Can you explain...

Discussed tax vs financial accounting. A concept introduced this week is material weakness. Can you explain this concept as related to tax and financial accounting?

Expert Solution

First of all let us understand the concept of material weakness –

Now what is material weakness?

It implies the ineffective and less efficient methods in accounting practices that could possibly lead to misrepresentation of data. It occurs due to the inadequate internal checks and control in discovering errors and preventing them from occurring again and also due to the wrong balances put in place by a firm. If the material weakness is not taken care properly then company has the risk of losing all data related to earnings and expenses. Various management professionals are employed to solve this weakness.

During financial reporting various accounting and finance professionals follow wrong practices and which leads to material weakness. Various tax norms and other specialized accounting policies and principles can be adhered if wrong methods are followed and the company can run into serious danger with privileged client information.

Therefore proper internal checks and control at required time intervals are needed to work efficiently and effectively which could possibly lead to removal of material weakness or lowers the chance of occurring during financial reporting whether it is tax accounting or financial accounting.

ekkarill92 answered 1 year ago

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