Certified Government Financial Manager (CGFM) 2026 – 400 Free Practice Questions to Pass the Exam

When deficiencies in internal controls are reported, both material and non-material aspects are affected because internal control systems are designed to ensure the integrity of financial reporting, compliance with laws and regulations, and operational efficiency. Material deficiencies can lead to significant consequences, such as misstatements in financial statements or breaches of compliance. Non-material deficiencies, while not having immediate or severe repercussions, can indicate underlying issues that may escalate into larger problems if not addressed.

Moreover, addressing both types of deficiencies is crucial for maintaining the overall effectiveness of internal controls. Organizations rely on a robust internal control system to mitigate risks, ensure accountability, and promote transparency in operations. Therefore, reporting deficiencies encompasses more than financial implications or compliance with specific guidelines; it reflects a comprehensive view of the organization's health and operational integrity.

The other options, such as focusing solely on financial implications, compliance with GAGAS, or review time estimates, do not capture the broad impact that recognizing deficiencies in internal controls carries. It is essential to understand that both material and non-material aspects play a critical role in the complete assessment and improvement of internal control systems.