Explorer

The issuer initiated and processed sales at numerous business units. The firm designated certain of the issuer's business units as (1) subject to more extensive audit procedures or (2) subject to less extensive audit procedures. With respect to business units subject to more extensive audit procedures the following deficiencies were identified: · The firm did not identify and test any controls that addressed the existence of accounts receivable. (AS 2201.39)

The issuer initiated and processed sales at numerous business units. The firm designated certain of the issuer's business units as (1) subject to more extensive audit procedures or (2) subject to less extensive audit procedures. With respect to business units subject to less extensive audit procedures the following deficiencies were identified: · In determining the extent to which audit procedures should be performed at these business units the firm did not evaluate whether (1) specific risks of material misstatement existed at these business units and (2) the risks of material misstatement the firm identified for the business units subject to more extensive audit procedures also applied to these business units such that in combination these risks presented a reasonable possibility of material misstatement. (AS 2101.11 and .12; AS 2201.B10)

The firm did not identify and test any controls over the accuracy of prices and quantities invoiced. (AS 2201.39)

For another IT system the firm did not identify and test any controls that addressed the risk that inappropriate changes could be made to the reports maintained in this system. (AS 2201.39)

The following deficiencies were identified for another type of revenue: · The firm did not identify and test any controls that addressed whether the performance obligation was satisfied before revenue was recognized. (AS 2201.39)

For one business unit the issuer recognized several types of revenue. The following deficiencies were identified: · For both types of revenue the firm did not identify and test any controls that addressed whether the quantities the issuer invoiced represented the quantities ordered by the customers. (AS 2201.39)

For another business unit the firm selected for testing a control over the transfer of data from the revenue system to the general ledger. The firm did not test the automated aspect of this control that addressed the completeness of the data transferred. (AS 2201.42 and .44)

The issuer offered preferred pricing based on a customer's status. The following deficiencies were identified with respect to revenue from certain of these customers: · The firm selected for testing a control that consisted of the issuer's review of customer pricing changes subsequent to the execution renewal or amendment of a customer contract with preferential pricing. The number of changes selected for testing did not provide sufficient appropriate audit evidence given the frequency with which the control operated. (AS 2201.46)

The issuer offered preferred pricing based on a customer's status. The following deficiencies were identified with respect to revenue from certain of these customers: · The firm selected for testing controls that included the issuer's review of customers' status. The firm did not test the aspects of these controls that addressed the issuer's review of changes to existing customers' status. (AS 2201.42 and .44)

The issuer offered preferred pricing based on a customer's status. The following deficiencies were identified with respect to revenue from certain of these customers: · The firm did not identify and test any controls over the accuracy of product cost information the issuer used to determine the sales prices in accordance with certain customer contracts. (AS 2201.39)

For these same business units the firm selected for testing certain controls that prevented the processing of orders for customers on credit hold. The firm did not test beyond inquiry the aspect of these controls that addressed which users had the ability to release customers from credit hold. (AS 2201.42 and .44)

The firm subjected certain other of the issuer's business units to less extensive audit procedures. With respect to revenue from these business units the following deficiencies were identified: · In determining the extent to which audit procedures should be performed the firm did not evaluate (1) the materiality of these business units (2) the decentralized nature of records and information processing at these business units and (3) whether the risks of material misstatement that the firm identified for the business units subject to more extensive audit procedures also applied to these business units. (AS 2101.11 and .12; AS 2201.B10)

The firm subjected certain other of the issuer's business units to less extensive audit procedures. With respect to revenue from these business units the following deficiencies were identified: · To address the risks of material misstatement related to revenue for these business units the firm selected for testing a control that included the issuer's comparisons and reviews of the consolidated (1) budget to actual results and (2) prior-period actual results to current-period actual results. The firm did not identify and test any controls over the review of the budget used in the operation of this control. (AS 2201.39)

The firm selected for testing controls that consisted of management's review of (1) aged accounts receivable and/or (2) a reconciliation of accounts receivable to monthly billings. The firm did not identify and test any controls over the accuracy of the aging report and certain data used in the operation of these controls. (AS 2201.39)

The firm was instructed by the principal auditor of the issuer to test specific controls of the component in the areas of revenue accounts receivable and inventory. During the audit the principal auditor provided additional information to the firm regarding certain of these controls including the existence of additional control attributes and changes to the description of the controls. The firm did not perform procedures to (1) understand if the revised control descriptions as communicated by the principal auditor were indicative of changes to the controls and if so change its tests of design and operating effectiveness and (2) test the additional control attributes communicated by the principal auditor including one such attribute related to the component's monitoring of the accuracy and frequency of inventory cycle counts. (AS 2201.42 and .44)

The firm's internal inspection program had inspected this audit and reviewed certain of these areas but did not identify certain of the deficiencies below. With respect to Accounts Receivable which was affected by the audit deficiencies related to user access and change management the following additional deficiency was identified: · The firm did not identify and test any controls over the posting of cash receipts to customer accounts and invoices. (AS 2201.39)

The firm's internal inspection program had inspected this audit and reviewed certain of these areas but did not identify certain of the deficiencies below. With respect to Accounts Receivable which was affected by the audit deficiencies related to user access and change management the following additional deficiency was identified: · The firm selected for testing a control that consisted of the issuer's review and analysis of accounts receivable as reflected in a customized system-generated accounts receivable aging report. The firm did not evaluate whether the automated aspect of this control which consisted of the system's aging of customer account balances was configurable and programmable and if so perform procedures to test the configuration and programming of the control. (AS 2201.42)

The following deficiency was identified: · The firm selected for testing a control that consisted of the configuration of the issuer's accounting system to automatically apply cash receipts to specific invoices and the manual investigation of outstanding items and unapplied cash receipts in the cash in-transit accounts. The firm did not test the automated aspect of this control related to the automatic application of cash receipts to specific invoices. (AS 2201.42 and .44)

The following deficiency was identified: · The firm selected for testing an automated control that consisted of the configuration of the issuer's accounting system to automatically record sales transactions based on revenue recognition triggers contained in the sales order and customer master files. The firm did not test whether the system accurately retrieved information from customer master files that was associated with the recorded sales. (AS 2201.42 and .44)

The following deficiency was identified: · The firm selected for testing a control that consisted of the reconciliation of goods invoiced to goods shipped and delivered. The firm did not perform procedures to test the design and operating effectiveness of this control. (AS 2201.42 and .44)

The issuer used an IT system to initiate process and record transactions related to certain revenue accounts receivable and inventory. The firm selected for testing various automated controls related to this revenue accounts receivable and inventory. The following deficiencies were identified: · The firm's testing of certain automated controls using a sample of only one instance of the control's operation was not sufficient because the firm did not test the configuration or programming of these controls or perform other procedures that would have provided sufficient appropriate audit evidence that these controls were designed and operating effectively. (AS 2201.42 and .44)

For one type of revenue and the related deferred revenue which were affected by the audit deficiencies the following deficiencies related to the firm's testing of controls were identified: · The firm selected for testing automated controls over customer set up modification and credit approval. The firm did not test the aspects of these controls related to the timing of approvals and the established credit limits. Further the firm's testing of the aspects of the controls related to possible override was not sufficient because the firm's procedures were limited to inquiry. (AS 2201.42 and .44)

For one type of revenue and the related deferred revenue which were affected by the audit deficiencies the following deficiencies related to the firm's testing of controls were identified: · The firm selected for testing automated controls over contract approval and product delivery. The firm's testing of these controls was not sufficient because the firm's procedures did not address certain types of contract scenarios and delivery types. (AS 2201.42 and .44)

For one type of revenue and the related deferred revenue which were affected by the audit deficiencies the following deficiencies related to the firm's testing of controls were identified: · For one control the firm did not perform any substantive procedures to test or in the alternative test any controls over the completeness of the lists from which it selected items for testing. (AS 1105.10)

For one type of revenue and the related deferred revenue which were affected by the audit deficiencies the following deficiencies related to the firm's testing of controls were identified: · The firm's testing of certain automated controls was not sufficient because the firm did not test the configuration or programming of these controls or perform other procedures that would have provided sufficient appropriate audit evidence that these controls were designed and operating effectively. Further the firm's testing of certain automated controls was not sufficient because its testing of certain aspects of the controls was limited to inquiry. (AS 2201.42 and .44)

For one type of revenue and the related deferred revenue which were affected by the audit deficiencies the following deficiencies related to the firm's testing of controls were identified: · For two automated controls the firm did not perform any substantive procedures to test or in the alternative test any controls over the completeness of the lists from which it selected items for testing. (AS 1105.10)

A component of the issuer (“component”) entered into contracts with customers in which revenue was recognized over time based on the extent of progress towards completion of the performance obligation. The following deficiency was identified: · The firm selected for testing a control that consisted of the component's review of gross receivables. The firm did not sufficiently test the operating effectiveness of the control because it did not test an aspect of the control related to certain receivables. (AS 2201.44)

A component of the issuer (“component”) entered into contracts with customers in which revenue was recognized over time based on the extent of progress towards completion of the performance obligation. The following deficiency was identified: · The firm selected for testing two controls that consisted of the component's review of contracts including the review of new and modified contracts for appropriate revenue recognition. For one control the firm did not identify and test any controls over the completeness of the new and modified contract data used in the operation of the control. (AS 2201.39)

A component of the issuer (“component”) entered into contracts with customers in which revenue was recognized over time based on the extent of progress towards completion of the performance obligation. The following deficiency was identified: · The firm selected for testing two controls that consisted of the component's review of contracts including the review of new and modified contracts for appropriate revenue recognition. For the other control the firm did not test or test any controls over the completeness of the contract listing from which it made its selections to test the control. (AS 1105.10)

With respect to three of the issuer's business units the following deficiency was identified: The firm's testing of certain automated controls over revenue and accounts receivable was not sufficient because the firm did not test the configuration or programming of these controls or perform other procedures that would have provided sufficient appropriate audit evidence that these controls were designed and operating effectively. (AS 2201.46)

For two of these business units the firm selected for testing a control that included the issuer's reviews of adjustments to the contract prices that were used to recognize revenue. The following deficiency was identified: · For the second business unit the firm did not identify and test any controls over the completeness of the report the control owners used in the operation of this control. (AS 2201.39)

The issuer used multiple information-technology (IT) systems to initiate process and/or record transactions related to revenue and the related accounts receivable investment securities and cash. With respect to user access: · The issuer used tools to manage user access to certain IT systems. The firm selected for testing controls over user access for these IT systems but did not test whether user access to certain of these IT systems was appropriately granted based on the permissions defined in these tools. (AS 2201.44)

The firm's testing of certain automated controls over this revenue and accounts receivable was not sufficient because the firm did not test the configuration or programming of these controls or perform other procedures that would have provided sufficient appropriate audit evidence that these controls were designed and operating effectively. (AS 2201.46)

The firm selected for testing certain automated controls that the issuer used to process and record revenue transactions. The firm did not sufficiently test these controls because the firm did not test whether these controls were designed to address and/or operated as designed for each relevant processing alternative. (AS 2201.42 and .44)

The firm selected for testing certain automated controls that the issuer used to process and record transactions related to revenue deferred revenue and accounts receivable. The firm did not sufficiently test these controls because the firm did not test the programming of these controls or perform other procedures that would have provided sufficient appropriate evidence that these controls were designed and operating effectively. (AS 2201.46)

The firm selected for testing certain automated controls that the issuer used to process and record transactions related to revenue deferred revenue and accounts receivable. For certain of these controls the firm did not test whether these controls operated as designed for each relevant processing alternative. (AS 2201.44)

The firm selected for testing two automated controls over certain revenue accounts receivable and inventory. The firm's testing of these automated controls was not sufficient because the firm did not test the programming of these controls or perform other procedures to test these controls that would have provided sufficient appropriate audit evidence that these controls were designed and operating effectively. (AS 2201.42 and .44)

The issuer used an IT system to initiate process and record transactions related to certain revenue and accounts receivable. The firm selected for testing controls that included the issuer's reviews of changes made to this IT system through administrative user access. When testing the design and operating effectiveness of these controls the firm did not evaluate (1) certain criteria that the control owners used to determine which types of changes would be subject to the issuer's reviews and (2) whether the control owners' review of only certain types of system changes and permissions was sufficient to address the risk that unauthorized changes were made. (AS 2201.42 and .44)

The firm selected for testing a control at one of the issuer's locations that consisted of the issuer's review of source documentation prior to processing customer invoices and credit memos. The firm did not test or test any controls over the completeness of the population of items from which it selected its samples for testing this control. (AS 1105.10)

The firm selected for testing a control at one of the issuer's locations that consisted of the issuer's review of source documentation prior to processing customer invoices and credit memos. The number of credit memos that the firm selected for testing did not provide sufficient appropriate evidence given the frequency with which the control operated. (AS 2201.46)

The issuer used an information-technology (IT) system to initiate process and record certain transactions related to revenue and accounts receivable. With respect to user access the following deficiencies were identified: · The firm selected for testing a user access control over this IT system that consisted of management's review and approval of user access requests. The firm did not perform procedures to test an aspect of this control related to the assignment of user access rights. (AS 2201.42 and .44)

The issuer used an information-technology (IT) system to initiate process and record certain transactions related to revenue and accounts receivable. With respect to user access the following deficiencies were identified: · The firm selected for testing another user access control over this IT system that consisted of the issuer's periodic monitoring of user access rights for appropriateness. The firm did not perform any procedures to (1) evaluate whether it was appropriate for the control to exclude certain users from monitoring and (2) test an aspect of this control that addressed whether the role and related functions assigned to each user were appropriate. (AS 2201.42 and .44)

The firm was instructed by the principal auditor to audit the financial statements and the effectiveness of ICFR of a subsidiary of the issuer to support the principal auditor's opinions on the consolidated financial statements and ICFR. The firm identified control deficiencies in controls that it had selected for testing over revenue accounts receivable and inventory for the subsidiary's two branches. The firm did not evaluate the severity of certain identified control deficiencies in accordance with the instructions of the principal auditor. (AS 2201.62)

The issuer reclassified credit balances in accounts receivable to accounts payable at year end. The firm did not identify and test any controls that addressed the risk that these credit balances may have resulted from errors in the allowances for contractual adjustments. (AS 2201.39)

The firm selected for testing a control over the issuer's review of the allowance for doubtful accounts. The following deficiencies were identified: · The firm did not identify and test any controls that addressed the reasonableness of the reserve percentage the issuer applied to certain past-due accounts receivable to determine the allowance for doubtful accounts during the operation of this control. (AS 2201.39)

The firm selected for testing a control over the issuer's review of the allowance for doubtful accounts. The following deficiencies were identified: · While performing its substantive procedures the firm identified an error in the issuer's estimate of the allowance for doubtful accounts. As a result of this error the firm identified that an aspect of this control was deficient but concluded that the remaining aspects of the control served as a compensating control. The firm did not perform procedures to evaluate whether the remaining aspects of this control would accomplish the control's objectives. (AS 2201.68)

The issuer recorded certain revenue net of estimated allowances for contractual adjustments. These estimated allowances were determined based in part on historical cash collections data applied at the transaction level. The firm did not identify and test any controls that addressed the accuracy of these data. (AS 2201.39)

For certain customer contracts the firm did not identify and test any controls that addressed whether relevant terms and conditions were identified and evaluated for appropriate revenue recognition. (AS 2201.39)

With respect to revenue and accounts receivable at certain other business units that the firm subjected to less extensive audit procedures the following deficiencies were identified: · The firm selected for testing an entity-level control that included the issuer's comparison of forecasts by business unit to actual results including revenue. The firm did not identify and test any controls over the forecasts used in the operation of this control. (AS 2201.39)

The issuer reported accounts receivables including unbilled receivables for multiple business entities. The firm did not identify and test any controls over accounts receivable for one of the issuer's business entities. (AS 2201.39)