What does reasonable possibility mean on the CPA exam?
Reasonable possibility. More than remote. The threshold at which a control deficiency becomes a significant deficiency or a material weakness.
Defined against AU-C 265.07.
Which CPA exam sections use reasonable possibility?
Reasonable possibility appears in the AUD section of the CPA exam.
Other terms defined against AU-C 265
- material weakness: A deficiency, or combination of deficiencies, in internal control over financial reporting where there is a reasonable possibility that a material misstatement will not be prevented, or detected and corrected, on a timely basis.
- significant deficiency: A deficiency, or combination of deficiencies, less severe than a material weakness but important enough to merit attention by those charged with governance.
Related terms
- excess business loss: The amount by which a noncorporate taxpayer's aggregate business deductions exceed business income plus a threshold.
- revenue recognition: Deciding when a sale becomes revenue.