Explorer

The firm's substantive procedures to test inventory included testing a sample of inventory items. The sample sizes the firm used in certain of its substantive procedures 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 as the firm did not identify and test any controls over inventory. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm used an issuer-prepared report in its substantive procedures to test the inventory reserve but did not perform any procedures to test or test any controls over the accuracy and completeness of this report. (AS 1105.10)

The firm's substantive procedures to test the valuation of inventory included selecting a sample of inventory items for testing. The firm did not perform any procedures to identify slow-moving inventory for certain inventory items selected for testing. (AS 2301.08 and .11)

The firm's substantive procedures to test whether inventory was stated at the lower of cost or net realizable value included selecting a sample of inventory items for testing. The firm did not perform any procedures to test certain inventory items selected for testing. Further the firm did not perform procedures to test certain other inventory items selected for testing beyond comparing the reported cost of the inventory item to its selling price reflected in the issuer's price list. (AS 2301.08 and .11)

Certain inventory was held by an outside custodian. The firm did not perform sufficient procedures to test the existence of this inventory because it limited its procedures to testing certain purchases of this inventory during the year. (AS 2510.14)

The firm selected for testing certain controls over the reconciliation and/or review of various accounts including certain accounts related to revenue and inventory. 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 did not identify and test any controls over (1) the accuracy and completeness of issuer-produced information used in the operation of the above controls and (2) the relevance and reliability of certain external information related to inventory used in the operation of one of the above controls. (AS 2201.39)

The issuer recorded an inventory reserve and the firm's approach for substantively testing the inventory reserve was to test the issuer's process. The following deficiency was identified: · The firm did not perform procedures to test or (as discussed above) identify and test controls over the accuracy and completeness of certain issuer-produced information used by the issuer to develop the inventory reserve. (AS 1105.10)

The issuer recorded an inventory reserve and the firm's approach for substantively testing the inventory reserve was to test the issuer's process. The following deficiency was identified: · The firm did not perform procedures to evaluate or (as discussed above) identify and test controls over the relevance and reliability of certain external information that the issuer used to develop the inventory reserve. (AS 1105.04 and.06)

The issuer recorded an inventory reserve and the firm's approach for substantively testing the inventory reserve was to test the issuer's process. The following deficiency was identified: · The firm did not perform procedures to evaluate the reasonableness of the significant assumptions. (AS 2501.16)

The firm performed inventory observations at an interim date and performed roll-forward procedures for the period from the interim date to year end. The firm did not perform any substantive procedures to test or in the alternative test controls over the accuracy and completeness of information the firm used in performing the roll-forward procedures. (AS 1105.10)

The firm did not perform substantive procedures to test inventory beyond comparing the balance to an issuer-produced report. (AS 2301.08)

The firm did not perform substantive procedures to test the excess or obsolete inventory reserve and inventory that had been written off during the year beyond obtaining and reading an issuer memorandum. (AS 2301.08; AS 2501.07)

The firm performed procedures to observe inventory on dates other than year end. The firm did not apply appropriate tests of intervening transactions in inventory between the count dates and year end. (AS 2510.12)

The firm performed procedures to observe inventory on dates other than year end. The firm did not perform any procedures to test costs in inventory including whether inventory was recorded at the lower of cost or net realizable value. (AS 2301.08)

The issuer determined a reserve for inventory was not necessary. The firm did not perform any procedures to test the issuer's determination. (AS 2501.07)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify certain of the deficiencies below. The firm did not identify and test any controls over certain inventory. (AS 2201.39)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify certain of the deficiencies below. The firm did not perform sufficient procedures to test this inventory as it limited its procedures to (1) confirming the balance with the principal auditor and (2) reconciling the balance to the general ledger. (AS 2301.08)

Deficiencies evaluating control review procedures and an undersized substantive sample for inventory valuation.

The issuer performed inventory counts prior to year end. The firm obtained issuer-prepared roll-forward analyses but did not perform procedures to test the completeness of the intervening transactions. (AS 2510.12)

The firm did not perform any procedures to test the existence of certain inventory. (AS 2510.09)

The firm did not perform sufficient procedures to test the inventory unit costs because its procedures were limited to recalculating the unit costs based on inventory quantity and costing information provided by the issuer and/or comparing certain unit costs to those provided by the issuer. (AS 2301.08 and .11)

The firm did not test whether the variances between the issuer's unit cost calculations and the actual costs incurred during the year were appropriately capitalized to inventory or expensed to cost of sales. (AS 2301.08 and .11)

The firm's approach for testing inventory reserve was to review and test management's process. The firm did not test the accuracy and completeness of certain data used by the issuer to estimate the inventory reserve. (AS 1105.10)

The issuer used multiple information-technology (IT) systems to initiate process and record inventory and inventory-related transactions. The firm relied on controls it selected for testing in its approach to testing inventory. In its testing of controls over inventory the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by these IT systems. As a result of the following deficiencies in the firm's testing of IT general controls (ITGCs) over certain of these IT systems the firm's testing of these automated and IT-dependent controls was not sufficient. (AS 2301.18)

The issuer used multiple information-technology (IT) systems to initiate process and record inventory and inventory-related transactions. The firm relied on controls it selected for testing in its approach to testing inventory. In its testing of controls over inventory the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by these IT systems. ? The firm selected for testing certain controls over change management and user access but did not perform procedures to test or test any controls over the completeness of the population of items from which it made its selections for testing. (AS 1105.10)

The issuer used multiple information-technology (IT) systems to initiate process and record inventory and inventory-related transactions. The firm relied on controls it selected for testing in its approach to testing inventory. In its testing of controls over inventory the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by these IT systems. ? The firm selected for testing a control that consisted of the issuer's periodic review of user access to one of its IT systems. The firm however did not perform procedures to test the design and operating effectiveness of this control. (AS 2301.19 and .21)

The issuer used multiple information-technology (IT) systems to initiate process and record inventory and inventory-related transactions. The firm relied on controls it selected for testing in its approach to testing inventory. In its testing of controls over inventory the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by these IT systems. ? The firm selected for testing a control over the authorization and restriction of privileged access to one of its systems. The firm did not perform sufficient procedures to test this control because it limited its procedures to testing that one type of privileged access was restricted at a point in time during the year. (AS 2301.16 and .21)

The issuer used multiple information-technology (IT) systems to initiate process and record inventory and inventory-related transactions. The firm relied on controls it selected for testing in its approach to testing inventory. In its testing of controls over inventory the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by these IT systems. ? For one of its IT systems the firm identified control deficiencies related to (1) developers having inappropriate access to the production environment and (2) the lack of monitoring of user activity. The firm did not evaluate the severity of these deficiencies and the effect on its control risk assessments. (AS 2301.34)

The firm selected for testing certain controls that consisted of the issuer's review of the costs at which inventory is recorded. For these controls 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 2301.19 and .21)

The sample sizes the firm used in certain of its substantive procedures to test inventory costs 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 deficiencies in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

For certain inventory the firm did not perform any procedures to test or as discussed above sufficiently test controls over the accuracy and completeness of an inventory aging report generated from the one of the issuer's IT systems it used to test the issuer's obsolete inventory reserve. (AS 1105.10)

Inventory held by the component was subject to cycle-counting procedures. The firm did not identify and test any controls that addressed whether inventory items were counted with sufficient frequency in accordance with the component's cycle-count program. (AS 2201.39)

The firm did not perform any substantive procedures or sufficiently test controls to determine that the cycle-count procedures the component used for this inventory were sufficiently reliable to produce results substantially the same as those that would have been obtained by a count of all items each year. (AS 2510.11)

Deficiencies in the firm's role testing inventory controls and performing inventory count observation procedures.

With respect to certain inventory the firm was instructed by the lead auditor to perform substantive procedures to test the valuation of the inventory including price testing at the stock keeping unit (SKU) level for which the firm was instructed to test every invoice that makes up the SKU category selected for testing. The firm did not test every invoice that made up the selected SKU category as instructed by the lead auditor. (AS 2301.08)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm's observation procedures at the selected locations were not suitable because the firm did not perform any substantive procedures to (1) investigate certain variances identified between the firm's test counts and the component's inventory records; (2) compare certain quantities of inventory measured by the firm to the component's inventory records; and (3) test inventory cut-off at one location. Therefore these observations did not provide sufficient evidence of the quantity of inventory at these locations. (AS 2510.09)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm did not perform substantive procedures to test the density and volume conversion factors used to determine the inventory quantity for certain items selected for testing beyond obtaining the factors from the company's specialists. Further the firm did not perform any procedures to use the work of the company's specialists as audit evidence. (AS 1105.A1 - .A10; AS 2510.09)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The test intervening transactions between the dates of its observation procedures and year-end the firm selected a sample of transactions related to the purchase and sale of inventory which represented approximately 86% and 28% of total inflows and outflows respectively of the total inventory movement. The samples the firm used to test the inventory movement did not provide sufficient appropriate audit evidence because in planning the samples the firm did not consider the characteristics of the entire population of inventory inflows and outflows and how differences in those characteristics would affect the determination of the number of separate inflow and outflow samples. (AS 2315.16 .23 and .23A)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm did not perform sufficient substantive procedures to test the intervening transactions it selected for testing because the firm's procedures were limited to agreeing certain information related to the transactions to data provided by the component. (AS 2510.12)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm did not perform any procedures to reconcile the quantities of certain inventory items counted at one location to the quantities of those items in the inventory schedule used to roll the results of the firm's observation procedures forward to year-end. (AS 2510.12)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm did not perform any substantive procedures to test the existence of inventory held at a third-party warehouse. (AS 2510.14)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm did not perform any substantive procedures to test the cost of raw materials inventory. (AS 2301.08)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm did not perform any procedures to test or test any controls over the completeness and/or accuracy of certain data or reports used in its substantive testing of inventory. (AS 1105.10)

The issuer stored certain raw materials in boxes with varying quantities. The firm selected for testing a cycle-count control over the existence of this inventory that consisted of (1) selecting a daily count location within the warehouse and counting the boxes of inventory in that location and (2) counting the contents of a small number of these boxes. In testing the cycle-count procedures that the issuer used for this inventory the firm did not evaluate whether the control was appropriately designed because the control owner was only required to count the contents of a small number of boxes in the selected daily count location. Further the firm did not test whether this control addressed that all inventory locations within the warehouse were counted during the period. (AS 2201.42)

The firm selected for testing a control that consisted of the issuer's performance of a physical inventory count at each location at an interim date and the issuer's roll-forward of these inventory counts to year end. The firm did not perform any procedures to test the aspect of this control related to the issuer's roll-forward procedures. (AS 2201.42 and .44)

The firm did not identify and test any controls that addressed whether the issuer's inventory system appropriately calculated the unit costs used to record certain manufactured inventory. (AS 2201.39)

The sample sizes the firm used in certain of its substantive procedures to test this inventory 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 firm's substantive procedures at year end to test the unit cost of this inventory included selecting a sample of inventory items for testing. The following deficiencies were identified: · The firm did not test whether the issuer's inventory system calculated the inventory unit costs appropriately. (AS 2301.08)

The firm's substantive procedures at year end to test the unit cost of this inventory included selecting a sample of inventory items for testing. The following deficiencies were identified: · The firm did not perform sufficient procedures to test the cost of the raw materials included in the selected items because its procedures were limited to comparing certain of these costs to system-generated reports. (AS 2301.08)