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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 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 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 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 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)

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 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)

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 labor and overhead costs included in the selected items because it did not test whether these costs were consistent with the standard labor and overhead rates that the issuer had determined. (AS 2301.08)

The firm's substantive procedures to test the unit cost of inventory consisted of selecting a sample of items for testing. For certain items selected for testing the firm did not perform sufficient procedures to test the unit cost because it inspected supporting documentation for only a portion of the quantity of these items held at year end. (AS 2301.08)

The firm used information produced by the issuer in its substantive procedures to test the reserve for excess and obsolete inventory. The firm did not perform any procedures to test or test controls over the accuracy and/or completeness of certain of this information. (AS 1105.10)

The firm did not perform any procedures to test or test controls over the accuracy of certain information produced by the issuer that the firm used in its substantive testing of the reserve for excess and obsolete inventory. (AS 1105.10)

For inventory at three business units one of which was affected by additional audit deficiencies the following deficiencies were identified: · The firm did not perform sufficient procedures to test the existence of this inventory because it did not inspect any records of the issuer's counts on which the year-end inventory was based. (AS 2301.08)

For another business unit the issuer performed full physical counts of inventory at various locations before year end. To test the existence of inventory at these locations the firm observed the issuer's physical counts and made certain independent test counts. The following deficiencies were identified: · For another location the firm did not perform any procedures to evaluate certain differences it identified from its independent test counts. (AS 2301.08)

For another business unit the issuer performed full physical counts of inventory at various locations before year end. To test the existence of inventory at these locations the firm observed the issuer's physical counts and made certain independent test counts. The following deficiencies were identified: · For two locations and certain other locations the firm did not perform appropriate procedures to test or test controls over the accuracy and/or completeness of certain issuer-produced reports it used to test intervening transactions between the dates of its inventory observations and year end. (AS 1105.10)

To test the existence of this inventory the firm performed independent physical counts of inventory at year end. The following deficiency was identified: · The firm did not sufficiently test inventory because it did not compare the inventory listings it used to perform its substantive procedures to the recorded balance. (AS 2301.08)

The issuer held certain inventory at foreign external warehouses which represented a significant proportion of the issuer's total assets. The firm did not perform sufficient procedures to test the existence of this inventory because it limited its procedures to confirming the quantities of this inventory with the external warehouses. (AS 2510.14)

The firm's internal inspection program had inspected this audit reviewed these areas and also identified the deficiencies below. The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to inventory. The firm selected for testing an automated control that used data generated or maintained by these IT systems. · The firm selected for testing two controls over change management and one control over transaction processing within these IT systems. The firm did not evaluate whether user access to perform the control over transaction processing was appropriately restricted for one of these IT systems. (AS 2201.42 and .44)

The firm's internal inspection program had inspected this audit reviewed these areas and also identified the deficiencies below. The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to inventory. The firm selected for testing an automated control that used data generated or maintained by these IT systems. · The firm selected for testing two controls over change management and one control over transaction processing within these IT systems. The firm did not perform any procedures to test or test any controls over the completeness of the population of items from which it selected its samples for testing these controls. (AS 1105.10)

The issuer performed cycle counts of the majority of its inventory. The firm did not perform sufficient substantive procedures to test this inventory because the firm did not evaluate the methodology and selection parameters used by the issuer or perform other procedures to determine whether the issuer's cycle-count procedures 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 firm did not perform any substantive procedures to test the unit cost of certain categories of inventory. (AS 2301.08)

The issuer performed cycle counts of inventory at one of its locations. The firm did not perform sufficient substantive procedures to test this inventory because the firm did not test the sampling methodology and selection parameters used by the issuer or perform other procedures to evaluate whether the issuer's cycle-count procedures 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 disclosed that inventory was subject to the risk of asset misappropriation by both internal and external parties. The firm did not identify this risk or perform any procedures to address this risk. (AS 2301.08)

The firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiencies below. The firm's substantive procedures to test the unit cost of certain inventory included selecting a sample of items for testing. The firm did not perform sufficient procedures to test the labor and overhead costs of the selected items because the firm did not test the labor and overhead rates the issuer had determined beyond reviewing the nature of the cost types that the issuer used to calculate the overhead rates. (AS 2301.08)

The firm did not perform sufficient procedures to test whether one type of inventory was stated at the lower of cost or net realizable value because the firm did not consider estimated costs of completion and estimated costs necessary to make the sale. (AS 2301.08)

For a second type of inventory the firm did not perform procedures to test whether the inventory was stated at the lower of cost or net realizable value beyond concluding that although the inventory had not yet been sold it expected the sales price to be higher than similar inventory given it was physically bigger. (AS 2301.08)

With respect to a third type of inventory in testing whether the inventory was stated at the lower of cost or net realizable value the firm did not (1) test the accuracy of the cost of the inventory beyond comparing it to the amounts relieved from inventory as part of its roll forward procedures described above (2) evaluate the effect of differences in asset types beyond consideration of physical size on the selling prices used in its analysis and (3) evaluate the ongoing availability of vouchers from government programs in its determination of the selling prices used in its analysis. (AS 2301.08)

To substantively test inventory the firm rolled forward the inventory balance from prior year and performed procedures to test the activity during the year including confirming purchases of inventory. The firm did not test the accuracy of the cost of certain inventory that was sold during the year. (AS 2301.08)

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 perform any substantive procedures to test this inventory. (AS 2301.08)

The issuer valued certain inventory using the last-in first-out (LIFO) method. The following deficiencies were identified: · The firm did not perform any substantive procedures to test the LIFO inventory reserve. (AS 2301.08)

The firm's substantive procedures at year end to test certain inventory included performing physical inventory count procedures using a report obtained from the issuer. The firm did not perform any procedures to test the completeness of the report. (AS 1105.10)

The issuer wrote off certain other inventory at year end. The firm did not perform any procedures to evaluate this write-off. (AS 2301.08)

For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm did not perform any substantive procedures to test the cost of certain inventory including the allocation of direct labor and overhead costs beyond comparing the cost of the inventory at year end to cost of the inventory at the end of the prior year. (AS 2301.08)

As a result of our inspection the firm performed additional procedures related to the deficiencies in controls over revenue and inventory discussed above and requested that the issuer reevaluate these controls. As a result of this reevaluation the issuer identified a material weakness related to the aggregation of control deficiencies over the issuer's information technology (“IT”) systems that had not been previously identified. The firm modified its report on the effectiveness of the issuer's ICFR to include this additional material weakness. The firm relied on information in reports generated from these general ledger systems in performing its substantive procedures over revenue and inventory but did not test the completeness of the information in certain of these reports beyond comparing certain amounts in these reports to the general ledger systems. (AS 1105.10)

Based on the firm's reliance on this entity-level control which was not supported due to the deficiency discussed above the firm limited its substantive procedures to test this inventory to various analytical procedures. These analytical procedures as designed provided little or no substantive evidence. (AS 2301.08)

In addition in the substantive testing discussed above the firm identified differences in the unit costs of inventory between the issuer's inventory systems but did not perform procedures to evaluate the differences. (AS 2301.08)

The firm did not perform any substantive procedures to evaluate whether the issuer's fixed overhead was expensed or capitalized appropriately in accordance with FASB ASC Topic 330. (AS 2810.30)

The firm did not perform any substantive procedures to evaluate whether this change represented a change in accounting principle under FASB ASC Topic 250 Accounting Changes and Error Corrections. (AS 2810.30)

As a result of the firm's control testing deficiencies the firm did not perform sufficient substantive procedures over this inventory as follows: · The firm's substantive procedures to test this inventory included substantive analytical procedures. The firm established its thresholds for investigating differences based on a level of control reliance that was not supported. As a result the thresholds that the firm used did not provide the desired level of assurance that misstatements that could have been material would be identified. (AS 2301.16 .18 and .37; AS 2305.20)

The firm's substantive procedures to test the unit cost of certain inventory included selecting a sample of inventory items for testing. For certain items in its sample the firm did not perform any procedures to test the cost of the raw materials included in the unit costs. (AS 2301.08)

The firm selected for testing controls over managing changes to the issuer's production environment. The following deficiencies were identified: · The firm did not perform any procedures to test or test any controls over the completeness of the population of items from which it selected its samples for testing these controls. (AS 1105.10)

The firm did not perform any substantive procedures to test whether inventory was recorded at the lower of cost or net realizable value. (AS 2301.08 and .11)

The firm's approach for substantively testing the excess or obsolete inventory reserve was to develop an independent expectation. The following deficiencies were identified: · The firm used certain data in its substantive procedures to test this reserve but did not perform any procedures to test or test any controls over the accuracy of this data. (AS 1105.10)

The firm's approach for substantively testing the excess or obsolete inventory reserve was to develop an independent expectation. The following deficiencies were identified: · The firm did not perform sufficient procedures to demonstrate it had a reasonable basis for the method used to develop its independent expectation because it did not demonstrate how its method took into account its understanding of the issuer's process including the significant assumptions used by the issuer so that its expectation considered the factors relevant to the estimate. (AS 2501.21 and .22)

The principal auditor instructed the firm to test the costing of inventory at one of the issuer's components by comparing inventory costs to vendor invoices payroll records labor hours and machine hours. The firm did not perform these substantive procedures. (AS 2301.08)

For one other location the firm did not perform any substantive procedures to test the existence of inventory at year end. (AS 2301.08 and .11)

The firm's approach for substantively testing inventory reserves was to test the issuer's process used to develop the reserve. The firm did not perform procedures to test or identify and test any controls over the completeness of certain information it used to substantively test the inventory reserve. (AS 1105.10)