Significant deficiency in internal control

5.  Which of the following would likely be considered a significant deficiency in internal control?
a.  Indications of an impending labor strike
b.  Undue bias or a lack of objectivity exhibited by management.
c.  Recurring cash flow problems indicative of a going concern issue.
d.  Evidence that the company may be in default under the terms of a long-term loan agreement.

Choice b is correct.  Undue bias or a lack of objectivity exhibited by those responsible for accounting decisions constitutes a significant deficiency in internal control.

Choices a, c and d are incorrect.  An impending labor strike, cash flow problems, and default on a loan are not deficiencies in the design or operation of internal control.
Example:
NOSC LA, Commander Luis Perez, Capt. Brian W. Todd, Master Chief Michael Andreen and Lt. Stephen Healey