(1) Reasonable possibility of misstatement – Factors that affect whether there is a reasonable possibility that a deficiency, or combination of deficiencies would result in ICFR not preventing or detecting in a timely manner a misstatement of a financial statement amount or disclosure, include, but are not limited to:
(a) the nature of the financial statement accounts, disclosures and assertions involved (e.g., related-party transactions involve greater risk);
(b) the susceptibility of the related asset or liability to loss or fraud (e.g., greater susceptibility increases risk);
(c) the subjectivity, complexity, or extent of judgment required to determine the amount involved (e.g., greater subjectivity, complexity, or judgment increases risk);
(d) the interaction or relationship of the control with other controls, including whether they are interdependent or address the same financial reporting risks;
(e) the interaction of the deficiencies (e.g., when evaluating a combination of two or more deficiencies, whether the deficiencies could affect the same financial statement amounts or disclosures); and
(f) the possible future consequences of the deficiency.
(2) Magnitude of misstatement – Various factors affect the magnitude of a misstatement that might result from a deficiency or deficiencies in ICFR. These factors include, but are not limited, to the following:
(a) the financial statement amounts or total of transactions relating to the deficiency; and
(b) the volume of activity in the account balance or class of transactions relating to the deficiency that has occurred in the current period or that is expected in future periods.