Explorer

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)

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

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)

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

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 firm selected for testing certain controls related to the issuer's review of the reserve for excess and obsolete inventory. The firm did not identify and test any controls over certain inputs used in the operation of these controls. (AS 2201.39)

The firm selected for testing automated controls over the recording of inventory upon receipt. The firm did not sufficiently test the design and operating effectiveness of these automated controls as it limited its testing to only certain scenarios without identifying and evaluating all relevant configurations. Further the firm tested these controls in the issuer's IT testing environment rather than in its production environment without performing any procedures to determine whether the testing environment was a complete replica of the production environment. (AS 2201.42 and .44)

The firm selected for testing an automated control over the timing and amount of cost of sales recognized. The firm did not test whether cost of sales was recognized (1) upon revenue recognition and (2) at standard cost. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the issuer's review of standard costing for inventory items with cost increases. In evaluating the design of this control the firm did not assess the effect of the issuer excluding decreases in costs on the control's ability to effectively prevent or detect a material misstatement. (AS 2201.42)

The firm selected for testing the issuer's cycle-count control over inventory at certain locations. The firm did not test the aspect of this control that addressed whether all inventory items at these locations were counted during the period. (AS 2201.42 and .44)

The firm selected for testing the issuer's cycle-count control over inventory at certain locations. The firm did not identify and test any controls that addressed the completeness of certain reports used in the operation of this control. (AS 2201.39)

For inventory at three business units one of which was affected by additional audit deficiencies the following deficiencies were identified: · The firm did not identify and test any controls over inventory costing. (AS 2201.39)

For inventory at three business units one of which was affected by additional audit deficiencies the following deficiencies were identified: · The firm selected for testing controls that consisted of the issuer's performance of physical inventory counts. The firm did not test the aspect of these controls that addressed whether recorded inventory reflected the results of the issuer's physical counts. (AS 2201.42 and .44)

For one business unit the firm selected for testing the issuer's cycle-count control over the existence of inventory. The firm did not evaluate whether this control was designed to address whether all recorded inventory items were counted. (AS 2201.42)

The issuer performed cycle counts of certain inventory. The firm selected for testing controls that consisted of the issuer's review of the cycle-count results. The following deficiencies were identified: · For one of these controls the firm did not test beyond inquiry certain aspects of this control. Further in evaluating the design of another aspect of this control the firm did not determine whether certain items identified for follow up were appropriately resolved. (AS 2201.42 and .44)

The issuer performed cycle counts of certain inventory. The firm selected for testing controls that consisted of the issuer's review of the cycle-count results. The following deficiencies were identified: · In evaluating the design of an aspect of another control the firm did not evaluate whether the thresholds the control owner used to identify items for investigation were sufficiently precise to detect material misstatements. (AS 2201.42)

The issuer performed cycle counts of certain inventory. The firm selected for testing controls that consisted of the issuer's review of the cycle-count results. The following deficiencies were identified: · The firm did not identify and test any controls over the accuracy of certain information used in the operation of the control. (AS 2201.39)

For certain inventory the firm did not identify and test any controls over the reserve for excess and obsolete inventory. (AS 2201.39)

With respect to this service organization the firm obtained a service auditor's report and identified a complementary user control related to change management that the service auditor's report described as necessary. The firm did not perform procedures beyond inquiry to evaluate whether the issuer had implemented this control. (AS 2201.39 and .B22)

The issuer reported a reserve for inventory. The firm did not identify and test any controls over the appropriateness of the method and certain assumptions used to determine the reserve. (AS 2201.39) In connection with our review the issuer reevaluated its accounting for the reserve for inventory and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently corrected this misstatement in a restatement of its financial statements and the firm revised and reissued its report on the financial statements. The issuer also reevaluated its controls over the reserve for inventory and concluded that a material weakness existed that had not been previously identified. The issuer subsequently reflected this material weakness in a revision to its report on ICFR and the firm revised its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report.

The firm did not identify and test any controls that addressed whether variances between actual and standard costs were appropriately calculated and recorded in the issuer's inventory system. (AS 2201.39)

The firm did not identify and test any controls over the completeness of the issuer's in-transit inventory. (AS 2201.39)

The issuer determined its excess and obsolete (E&O) reserve for certain inventory based in part on a calculation of the amount of this inventory it expected to use to manufacture certain products. The firm did not identify and test any controls over this calculation. (AS 2201.39)

The firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiencies below. The firm did not identify and test any controls that addressed whether the unit costs the issuer used to record inventory were based on the standard material labor and overhead rates that the issuer had determined. (AS 2201.39)

The issuer performed cycle counts of certain inventory. The firm did not identify and test any controls that addressed whether this inventory was counted with sufficient frequency in accordance with the issuer's cycle-count policy. (AS 2201.39)

The issuer used an information-technology system to calculate and record the cost of its inventory. The firm did not identify and test any controls over the calculation of the cost of inventory. (AS 2201.39)

The issuer performed cycle counts of inventory at certain of the issuer's locations. The firm selected for testing controls that consisted of the issuer's cycle-count procedures and reviews of reports to monitor the frequency and accuracy of the counts. The following deficiencies were identified: · The issuer designed its cycle-count procedures to exclude up to half of the inventory at each location from the cycle counts. In evaluating the design of these controls the firm did not assess the effect of the issuer excluding this portion of inventory on the controls' ability to effectively prevent or detect a material misstatement. (AS 2201.42)

The issuer performed cycle counts of inventory at certain of the issuer's locations. The firm selected for testing controls that consisted of the issuer's cycle-count procedures and reviews of reports to monitor the frequency and accuracy of the counts. The following deficiencies were identified: · The firm did not evaluate whether these controls were appropriately designed to monitor the accuracy of the cycle counts and address whether sufficient inventory items were counted with sufficient frequency because the firm did not identify that the reports the control owners reviewed did not include information related to the frequency with which each item was counted and the accuracy of the cycle counts for each of these items. (AS 2201.42)

The issuer performed cycle counts of inventory at certain of the issuer's locations. The firm selected for testing controls that consisted of the issuer's cycle-count procedures and reviews of reports to monitor the frequency and accuracy of the counts. The following deficiencies were identified: · The issuer's cycle-count procedures were designed to have the same person responsible for generating count sheets performing the cycle counts entering the results into the system following up on identified differences and posting certain adjustments. The firm did not identify and evaluate whether this resulted in a lack of segregation of duties. (AS 2201.42)

The firm did not identify and test any controls over the existence of inventory at certain of the issuer's locations. (AS 2201.39)

With respect to work-in-process inventory at one of the issuer's business units which the firm designated as subject to more extensive audit procedures the following deficiencies were identified: • The firm did not identify and test any controls over this inventory. (AS 2201.39)

The issuer valued certain inventory using the last-in first-out (LIFO) method. The following deficiencies were identified: · The firm did not identify and test any controls over the LIFO inventory reserve. (AS 2201.39)

The issuer used an IT system to initiate process and record certain inventory and inventory-related transactions and deployed a separate instance of the system at a majority of its warehouses. Changes to this system were first deployed to some warehouses for purposes of pilot testing after which the changes were deployed to the remaining warehouses. The following deficiency was identified: • The firm selected for testing controls over inventory that consisted of the configuration of the IT system to automatically (1) calculate daily inventory cycle count tasks and (2) verify inventory receipts and shipments. The firm did not test the design and operating effectiveness of these controls in instances of the legacy (or unmodified) version of the IT system or perform procedures beyond inquiry to evaluate whether the tested configurations were consistently designed and applied in all instances across the system. (AS 2201.42 and .44)

For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing a control over the determination and recording of a slow-moving inventory provision for certain inventory which included an automated control that calculated the provision. The firm did not test the configuration or programming of the automated control or perform other procedures that would have provided sufficient appropriate audit evidence that the control was designed and operating effectively. (AS 2201.42 and .44)

For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing a control over inventory that consisted of the performance of physical inventory counts at certain locations by a third-party stock counter. The issuer designed the control to exclude a portion of inventory from those counts. In evaluating the design of the control the firm did not evaluate the effect of the issuer's exclusion of a portion of inventory from the physical counts on the control's ability to effectively prevent or detect a material misstatement. (AS 2201.42)

The firm selected for testing as instructed by the principal auditor a control that consisted of the performance of periodic cycle counts and the review and approval of related adjustments. The firm did not evaluate whether the documentation it inspected for unobserved inventory cycle counts provided evidence that all steps related to those counts were performed as designed. (AS 2201.44)

The firm did not identify and test any controls over the existence of inventory held at customers' warehouses. (AS 2201.39)

For one of the locations the firm identified and tested a compensating control to address a control deficiency it identified related to access and the ability to make changes to the general ledger. This compensating control related to testing reviewing and approving changes prior to migration into the general ledger system. The firm did not evaluate the implications of one type of users' ability to modify certain information used in the operation of this control. (AS 2201.68)

The firm did not identify and test any controls that addressed whether the inventory subsidiary ledgers for these business units accurately calculated inventory values using the correct item cost at year end. (AS 2201.39)

The firm did not identify and test any controls over the calculation of last-in first-out values for one category of inventory. (AS 2201.39)

For the other two locations the firm selected for testing three access controls that consisted of reviews of whether access to the general ledger system was appropriately restricted based on the system profiles. The firm did not evaluate whether the access provided through these profiles was appropriate based on users' functional needs. (AS 2201.42 and .44)

The issuer performed daily cycle counts of inventory but designed its counts to exclude a portion of inventory from the daily cycle counts. In evaluating the design of the cycle-count control the firm did not assess the effect of the issuer excluding this portion of inventory on the control's ability to effectively prevent or detect a material misstatement. (AS 2201.42)

Certain inventory held by the issuer in several locations was subject to cycle counts. The following deficiencies were identified: · The firm did not identify and test any controls over the issuer's monitoring of the results of the cycle counts to assess whether its perpetual inventory records were reliable. (AS 2201.39)

Certain inventory held by the issuer in several locations was subject to cycle counts. The following deficiencies were identified: · For inventory at certain of these locations the firm identified deficiencies in certain controls over the issuer's cycle-count program related to whether sufficient inventory items were counted with sufficient frequency in accordance with the issuer's cycle-count program. The firm identified and tested compensating controls that it believed mitigated these deficiencies. The firm did not identify that these compensating controls did not address whether sufficient inventory items were counted with sufficient frequency in accordance with the issuer's cycle-count program. (AS 2201.68)

Certain inventory held by the issuer in several locations was subject to cycle counts. The following deficiencies were identified: · Due to the deficiencies discussed above the firm's testing of controls did not provide sufficient appropriate audit evidence that the cycle-count procedures the issuer 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)

The issuer used information-technology (IT) systems to initiate process and record transactions related to certain inventory. The firm selected for testing certain automated controls but did not test the configuration or programming of these automated controls or perform other procedures that would have provided sufficient appropriate audit evidence that these automated controls were designed and operating effectively. (AS 2201.42 and .44)

The firm did not identify and test any controls that addressed whether the issuer's fixed overhead was expensed or capitalized appropriately in accordance with FASB ASC Topic 330 Inventory. (AS 2201.39)

The firm selected for testing certain automated controls over this inventory. The firm's testing of only one instance of these automated controls was not sufficient because the firm did not test the 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)