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The issuer reported convertible debt agreements that included embedded conversion options; the issuer accounted for these options as derivative liabilities. The firm's approach for substantively testing the fair value of the derivative liabilities was to test the issuer's process. The following deficiencies were identified: · The firm did not perform any substantive procedures to evaluate whether the issuer's accounting for the conversion options embedded in the convertible debt agreements as derivative liabilities was in conformity with FASB ASC Topic 815 Derivative and Hedging Activities. (AS 2301.08)

The issuer reported convertible debt agreements that included embedded conversion options; the issuer accounted for these options as derivative liabilities. The firm's approach for substantively testing the fair value of the derivative liabilities was to test the issuer's process. The following deficiencies were identified: · The firm did not evaluate the reliability of certain data the issuer used to determine the fair value of the derivative liabilities. (AS 1105.04 and .06)

The issuer reported convertible debt agreements that included embedded conversion options; the issuer accounted for these options as derivative liabilities. The firm's approach for substantively testing the fair value of the derivative liabilities was to test the issuer's process. The following deficiencies were identified: · The firm did not perform sufficient substantive procedures to evaluate whether the method used by the issuer to develop the fair value of the derivative liabilities was in conformity with the requirements of GAAP and appropriate for the nature of the account including whether the data was appropriately used and significant assumptions were appropriately applied under GAAP because the firm did not test the formulas embedded in the issuer's schedules to determine whether they produced substantially the same result as the model the issuer purportedly used. (AS 2501.10)

The issuer reported convertible debt agreements that included embedded conversion options; the issuer accounted for these options as derivative liabilities. The firm's approach for substantively testing the fair value of the derivative liabilities was to test the issuer's process. The following deficiencies were identified: · The firm did not identify and evaluate the issuer's omission of disclosures related to the inputs and quantitative information about the significant unobservable inputs used to measure the fair value of the derivative liabilities that were required by FASB ASC Topic 820 Fair Value Measurement. (AS 2810.30 and .31)

The issuer used multiple IT systems to initiate process and record transactions related to certain revenue and derivatives. The firm tested ITGCs for these IT systems. The following deficiencies were identified: · The firm did not perform any substantive procedures to test or in the alternative test any controls over the completeness of the system-generated reports that it used to select its sample for testing controls over change management for certain of these systems. (AS 1105.10)

The issuer used multiple IT systems to initiate process and record transactions related to certain revenue and derivatives. The firm tested ITGCs for these IT systems. The following deficiencies were identified: · The firm selected for testing a control over the segregation of duties related to the ability to develop and implement changes to these IT systems. In its testing of the operating effectiveness of this control for certain of these systems the firm did not test whether users with the ability to implement changes also had the ability to develop changes. (AS 2201.44)

The issuer used multiple IT systems to initiate process and record transactions related to certain revenue and derivatives. The firm tested ITGCs for these IT systems. The following deficiencies were identified: · The firm selected for testing a control over the approval of new or modified user access to these IT systems. In its testing of the operating effectiveness of this control the firm (1) excluded certain types of new users from its testing population and (2) did not test the aspect of this control related to the modification of access for existing users. (AS 2201.44)

The issuer used multiple IT systems to initiate process and record transactions related to certain revenue and derivatives. The firm tested ITGCs for these IT systems. The following deficiencies were identified: · The firm selected for testing a control over the removal of access to these systems for terminated users. The firm identified an exception in the operation of this control but did not evaluate the effect of this exception on the operating effectiveness of this control. (AS 2201.48)

The issuer used multiple IT systems to initiate process and record transactions related to certain revenue and derivatives. The firm tested ITGCs for these IT systems. The following deficiencies were identified: · The firm selected for testing a control over the periodic review of user access. For certain of these systems the firm did not identify and test any controls over the accuracy and completeness of the reports that the control owners used in the operation of this control. (AS 2201.39)

The issuer used multiple IT systems to initiate process and record transactions related to certain revenue and derivatives. The firm tested ITGCs for these IT systems. The following deficiencies were identified: · The firm tested various automated controls over this revenue and derivatives that used data from certain of these IT systems. As a result of the deficiencies in the firm's testing of ITGCs discussed above the firm's testing of these automated controls was not sufficient. (AS 2201.46)

The issuer calculated certain revenue and recorded the fair value of its derivatives based on security prices it obtained from external pricing services. The firm did not identify and test any controls over the reliability of the prices obtained from the external pricing services. (AS 2201.39)

The sample sizes the firm used in certain of its substantive procedures to test this revenue were too small to provide sufficient appropriate audit evidence because these procedures were designed based upon a level of control reliance that was not supported due to the deficiencies in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

During the year the issuer entered into a convertible debt agreement that included an embedded conversion option; the issuer accounted for this option as a derivative liability. The following deficiency was identified: · The issuer engaged a specialist to determine the fair value of this liability at issuance. The firm's approach for substantively testing the fair value of this liability at issuance was to test the issuer's process and the firm used an auditor-employed specialist to evaluate a significant assumption the company's specialist developed using a range of potential assumptions from comparable companies. The firm did not identify that the work of the auditor-employed specialist did not provide sufficient appropriate audit evidence because the auditor-employed specialist's procedures were limited to determining that the assumption was among the higher end of the range of potential assumptions. (AS 1105.A8b; AS 1201.C6 and .C7)

During the year the issuer entered into a convertible debt agreement that included an embedded conversion option; the issuer accounted for this option as a derivative liability. The following deficiency was identified: · The firm did not identify and evaluate misstatements in the financial statements and required disclosures related to this derivative liability. (AS 2810.30 and .31)

The firm selected for testing a control that consisted of reviews of the appropriateness of the models the issuer used to determine the fair values of investments and derivatives. The firm did not evaluate the review procedures that the control owners performed including the procedures to identify items for follow up and the procedures to determine whether those items were appropriately resolved. (AS 2201.42 and .44)

The firm selected for testing a control over the valuation of the issuer's investments and derivatives that consisted of reviews of the recorded fair values. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of certain assumptions used to determine these fair values. (AS 2201.42 and .44)

The sample sizes the firm used in certain of its substantive procedures to test these investments and derivatives were too small to provide sufficient appropriate audit evidence because these procedures were designed based on a level of control reliance that was not supported due to deficiencies in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm did not perform any substantive procedures to test investments and derivatives at certain of the issuer's business units. (AS 2301.08)

The issuer used models to value certain derivatives. The firm selected for testing a control that consisted of the issuer's review of the fair values determined by these models. The firm did not evaluate the specific review procedures the control owner performed to assess the reasonableness of the resulting fair values for certain of these derivatives. (AS 2201.42 and .44)

The issuer used eight information-technology (IT) applications to initiate process and record transactions related to revenue trade receivables and derivatives. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and/or reports generated or maintained by certain of these IT applications. As a result of the following deficiencies in the firm's testing of IT general controls (ITGCs) the firm's testing of these automated and IT-dependent controls was not sufficient. (AS 2201.46)

With respect to change management: The firm selected for testing certain change management controls over the eight IT applications discussed above that consisted of the documentation review testing and approval of changes prior to their implementation into production. In addition all changes made in the production environment were to be recorded in a ticketing system. For certain instances tested the firm did not perform procedures to test the operating effectiveness of these change management controls beyond verifying the existence of a change ticket recorded in the issuer's ticketing system. (AS 2201.44)

The firm did not evaluate whether the issuer had appropriately calculated and presented certain derivative losses in the statement of cash flows. (AS 2301.08)

The firm did not identify and evaluate the issuer's omission of certain disclosures related to these derivative losses that were required under FASB ASC Topic 230 Statement of Cash Flows. (AS 2810.30 and .31)

The issuer used various models in the valuation of certain derivatives. The firm selected for testing controls over these models that consisted of (1) the validation of the design and construction of models that met certain criteria and (2) the annual review of the models that were not subject to the first control. The firm did not evaluate the review procedures the control owners performed including the criteria the control owners used to identify items for follow up and whether those items were appropriately resolved. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the review of the categorization of certain derivatives within the fair value hierarchy as set forth in FASB ASC Topic 820 Fair Value Measurement. The firm did not evaluate the specific procedures the control owner performed to assess the reasonableness of the categorization within the fair value hierarchy. (AS 2201.42 and .44)

The firm did not perform any substantive procedures to evaluate the reasonableness of the issuer's categorization of these derivatives within the fair value hierarchy. (AS 2502.43)

The issuer determined the recorded fair value of its derivatives based on valuations provided by an external valuation specialist. The firm selected for testing a control that consisted of the review of the valuation report prepared by the external valuation specialist including underlying inputs and assumptions. The firm did not evaluate the review procedures that the control owner performed including the procedures to identify items for follow up and the procedures to determine whether those items were appropriately resolved. (AS 2201.42 and .44)

The issuer determined the recorded fair value of its derivatives based on valuations provided by an external valuation specialist. The firm selected for testing a control that consisted of the review of the valuation report prepared by the external valuation specialist including underlying inputs and assumptions. The firm did not identify and test any controls over the accuracy and completeness of the information that was used in the operation of this control. (AS 2201.39)

The firm selected for testing a control that consisted of the issuer's review of the appropriateness of the accounting treatment for a convertible debt transaction and related derivatives that the issuer entered into during the year. The firm did not evaluate the review procedures that the control owner performed including the procedures to identify items for follow up and the procedures to determine whether those items were appropriately resolved. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the review of the price curves that the issuer used to determine the value of commodity derivatives. The firm did not evaluate the review procedures that the control owner performed including the procedures to identify items for follow up and the procedures to determine whether those items were appropriately resolved. (AS 2201.42 and .44)

The firm did not identify and test any controls that addressed the reasonableness of a significant assumption that the issuer used to value commodity derivatives for which monthly price quotes were not available. (AS 2201.39)

The firm did not perform any substantive procedures to evaluate the reasonableness of the significant assumption discussed above. (AS 2502.26 and .28)

The issuer's determination of whether to present gains and losses on derivative trades on a gross or net basis in the issuer's income statement was dependent on how the derivative trades were designated in the issuer's derivatives system. The firm did not identify and test any controls that addressed whether derivative trades had been appropriately designated in the system by the issuer's traders. (AS 2201.39)

The sample sizes the firm used in certain of its substantive procedures to test the presentation and disclosure of derivative trades were too small to provide sufficient appropriate audit evidence because these procedures were designed based on a level of control reliance that was not supported due to the deficiency in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The issuer used various models to value certain derivatives. The firm selected for testing a control that consisted of the review and validation of (1) new or updated models and (2) existing models based on issuer-assigned risk ratings. The firm did not evaluate the review procedures that the control owners performed including the procedures to identify items for follow up and procedures to determine whether those items were appropriately resolved. (AS 2201.42 and .44)

The issuer determined that certain of its derivative contracts qualified for the scope exception for normal purchases and normal sales under FASB ASC Topic 815 Derivatives and Hedging and recorded revenue for transactions related to these contracts. The firm did not perform any procedures to evaluate whether the issuer's accounting for these contracts including the revenue recognized was appropriate. (AS 2301.08)

The issuer designated certain instruments as net investment hedges under FASB ASC Topic 815 Derivatives and Hedging. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's review of its hedge accounting but did not evaluate the specific review procedures that the control owner performed over the accuracy and completeness of the issuer-prepared schedules used to evaluate the hedge accounting. (AS 2201.42 and .44)

The issuer designated certain instruments as net investment hedges under FASB ASC Topic 815 Derivatives and Hedging. The following deficiencies were identified: · The firm's substantive procedures to test these net investment hedges consisted of substantive analytical procedures. The firm used data produced by the issuer to develop its expectations but did not test or test any controls over the accuracy and completeness of these data. (AS 2305.16)

The firm's approach for substantively testing the fair value of the derivative liability was to review and test management's process. The firm did not perform any procedures beyond inquiring of management to evaluate whether the model the issuer used to estimate the fair value of the derivative liability was appropriate. (AS 2502.26)

During the year the issuer entered into certain equity-related agreements; the issuer accounted for each of these agreements as one or more derivatives. The following deficiencies were identified: · The firm did not evaluate whether the issuer's accounting for one of these agreements was in conformity with FASB ASC Topic 815 Derivatives and Hedging. (AS 2301.08)

During the year the issuer entered into certain equity-related agreements; the issuer accounted for each of these agreements as one or more derivatives. The following deficiencies were identified: · The firm's approach to substantively test the fair values of these derivatives at issuance and year end was to test the issuer's process. The firm did not perform procedures to evaluate the reasonableness of certain significant assumptions used in the valuation of these derivatives at issuance and year end beyond reading an issuer-prepared memorandum and inquiring of management and for one of the agreements a counterparty. (AS 2501.16)

During the year the issuer entered into certain equity-related agreements; the issuer accounted for each of these agreements as one or more derivatives. The following deficiencies were identified: · The firm did not identify and evaluate the issuer's omission of certain disclosures required under FASB ASC Topic 820 related to the valuation of these derivatives at issuance and year end. (AS 2810.30 and .31)

The issuer recorded a derivative liability and determined the fair value of the derivative liability using an option pricing model. The firm did not consider the variability of a certain provision and the issuer's ability to settle the transactions in evaluating whether the use of this model was appropriate and consistent with GAAP and related SEC guidance. (AS 2502.18)

The firm did not determine whether certain other instruments should have been accounted for as paid-in capital in conformity with FASB ASC Subtopic 470-20 Debt with Conversion and Other Options. (AS 2810.30)

The issuer held a portfolio of derivatives and investment securities (collectively 'investments') which were carried at fair value. - The firm selected for testing a control that consisted of a reconciliation of mark to market values of derivatives and investment securities and the investigation of variances over established thresholds. The firm did not test an aspect of the control related to certain investment securities. Further the firm did not evaluate the specific review procedures that the control owner performed to determine whether items identified for follow-up were appropriately resolved. (AS 2201.42 and .44)

The issuer held a portfolio of derivatives and investment securities (collectively 'investments') which were carried at fair value. - The firm selected for testing a control that consisted of a reconciliation of mark to market values of derivatives and investment securities and the investigation of variances over established thresholds. The firm did not identify and test any controls over the accuracy and completeness of certain data used in the operation of this control. (AS 2201.39)

The issuer held a portfolio of derivatives and investment securities (collectively 'investments') which were carried at fair value. - The firm selected for testing another control that consisted of management's review and approval of certain adjustments to derivative values for counterparty credit risk. The firm did not evaluate the specific review procedures that the control owner performed to evaluate the reasonableness of the adjustments. (AS 2201.42 and .44)

The issuer held a portfolio of derivatives and investment securities (collectively 'investments') which were carried at fair value. - The firm selected for testing another control that consisted of management's review and approval of certain adjustments to derivative values for counterparty credit risk. The firm did not identify and test any controls over the accuracy of certain data used in the operation of this control. (AS 2201.39)

The issuer held a portfolio of derivatives and investment securities (collectively 'investments') which were carried at fair value. - The firm selected for testing two automated controls over the calculation of interest from and valuation of certain investment securities. The firm's testing of these automated controls using a sample of only one instance of the controls' 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)

The issuer was party to a contract with one of its customers that required the issuer to provide a minimum monthly volume of oil produced from a defined area within one of its properties. The issuer determined that the contract represented a derivative contract and qualified for the scope exception for normal purchases and normal sales under FASB ASC Topic 815 Derivatives and Hedging. The contract included a provision that allowed the issuer to defer any payments owed to the customer for any production below the minimum monthly volumes over the life of the contract ('volume payment') until the end of the contract. Subsequent to year end but prior to the issuer filing its financial statements the issuer renegotiated certain terms of the contract and determined that these changes were enforceable as of year end. With respect to the firm's control testing over and substantive procedures related to whether the contract qualified for the derivative accounting scope exception for normal purchases and normal sales the following deficiencies were identified: · The firm did not identify and test any controls over the issuer's evaluation of the changes to the terms of the contract and the potential implications on the issuer's accounting for the contract in accordance with FASB ASC Topic 815. (AS 2201.39)