A material weakness and a significant deficiency are both deficiencies in a company’s internal controls over financial reporting — but they sit at different points on the severity scale, and the consequences of each are substantially different. What They Are Internal controls over financial reporting (ICFR) are the processes a company uses to ensure that its financial statements are accurate. Auditors and management evaluate these controls under frameworks like COSO and standards like PCAOB AS 2201 (for U.