Explorer

The issuer processed and recorded transactions related to revenue inventory and sales commission expense and sales commission payable using several information-technology ('IT') systems including its enterprise resource planning ('ERP') system. The accuracy and completeness of the data and reports from the ERP system depended on effective IT general controls ('ITGCs'). The firm identified a significant deficiency in ITGCs related to user access to the ERP system. The firm selected for testing various controls over inventory that used data maintained by the ERP system. The firm's testing of these controls was not sufficient because it did not consider the implications of the ineffective ITGCs over this system as discussed above. (AS 2201.46)

The issuer processed and recorded transactions related to revenue inventory and sales commission expense and sales commission payable using several information-technology ('IT') systems including its enterprise resource planning ('ERP') system. The accuracy and completeness of the data and reports from the ERP system depended on effective IT general controls ('ITGCs'). The firm identified a significant deficiency in ITGCs related to user access to the ERP system. The firm selected for testing an automated control that consisted of the recording of inventory upon receipt. The firm did not obtain an understanding of how the system was configured to initiate process and record the receipt of inventory. As a result the firm did not test the configuration of this control or perform other procedures that would have provided sufficient appropriate audit evidence that the control was designed and operating effectively. (AS 2201.34 .42 and .44)

The firm's sample to test the issuer's reserve for excess and obsolete inventory at one business unit was too small to provide sufficient appropriate audit evidence because in determining the sample size the firm did not take into account tolerable misstatement the allowable risk of incorrect acceptance and the characteristics of the population. (AS 2315.16 .23 and .23A)

The firm's sample was not representative of the population because the firm selected inventory items that had a recorded reserve but did not select any items that did not have a recorded reserve. (AS 2315.24)

During the year the issuer recorded certain revenue from consignment arrangements whereby revenue was recognized and inventory was relieved when products were shipped to customers by resellers. The firm did not perform any procedures to evaluate the reliability of the information that it obtained from resellers and used to test this revenue and the inventory held on consignment. (AS 1105.04 and .06)

The firm did not sufficiently test a component of the issuer's reserve for excess and obsolete inventory because its procedures were limited to recalculating the reserve using information obtained from the issuer's external warehouse manager without evaluating the reliability of this information. (AS 1105.04 and 06)

The issuer performed a combination of cycle counts and full physical counts of inventory held at certain locations. To test the existence of inventory at these locations the firm performed independent physical counts of inventory before year end. The firm did not test any intervening transactions and did not inspect any records of the issuer's counts and procedures on which the year-end inventory was based. (AS 2510.12)

At two of the issuer's locations the issuer valued certain inventory at standard cost and capitalized certain labor and overhead costs to inventory based on the difference between the actual costs incurred and the costs recorded at standard. The firm did not perform sufficient substantive procedures to test the capitalized variance recorded by the issuer at year end because it did not evaluate whether the amount the issuer used to calculate the capitalized variance represented the actual difference between actual and standard costs. (AS 2301.08)

At one of these locations the issuer valued certain inventory using the last-in first-out (LIFO) method. The firm used certain information provided by the issuer to test the LIFO reserve but did not perform any procedures to test or test any controls over the accuracy of this information. (AS 1105.10)

The issuer recorded an excess and obsolete (E&O) inventory reserve for certain inventory based on the inventory on hand compared to the sales forecast for this inventory. The firm did not perform any procedures to evaluate the reasonableness of the sales forecast that the issuer used to develop this E&O inventory reserve. (AS 2501.16)

The firm's approach for substantively testing the reserve for excess and obsolete inventory was to develop an independent expectation. The firm did not perform any procedures to demonstrate it had a reasonable basis for certain assumptions it developed. (AS 2501.22)

To test the valuation of inventory the firm selected key items and then selected a sample of additional inventory items that exceeded a monetary threshold for testing. The firm did not perform any procedures to test the remaining population of inventory that was less than the monetary threshold. (AS 2315.24)

The firm selected for testing various controls that consisted of management's review of (1) inventory costs including capitalized overhead (2) inventory valuation and (3) related account reconciliations. 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 observed physical inventory counts on various dates subsequent to year end. The firm did not perform procedures to test intervening transactions between the issuer's year end and the dates of its inventory observations beyond testing the purchase activity for one location. (AS 2510.12)

The firm observed physical inventory counts on various dates subsequent to year end. The firm did not perform any procedures to test certain identified differences in inventory quantities between the count dates and year end. (AS 2510.12)

The firm used the issuer's inventory aging report in its substantive testing of the inventory reserve. The firm did not test or test controls over the accuracy and completeness of the information included in the inventory aging report. (AS 1105.10; AS 2501.11)

The firm selected for testing a control that consisted of management's review of the issuer's financial close checklist which included 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 perform any substantive procedures to test certain inputs used by the issuer to determine the cost of certain inventory. Further the firm did not perform sufficient substantive procedures to test the allocation of overhead costs to this inventory because it limited its procedures to comparing costs and production to the prior year without performing procedures to determine whether prior year costs and production would be representative of the current year. (AS 2301.08)

For certain other inventory the firm did not perform any substantive procedures to test or in the alternative identify and test any controls over the accuracy and completeness of certain reports that it used in its inventory cost testing. (AS 1105.10)

The issuer used an information technology (IT) application to process inventory transactions and calculate inventory costs. To reduce the extent of its substantive procedures over the valuation of inventory the firm tested and placed reliance on certain application controls. The following deficiencies were identified: · The firm selected for testing a logical access control over this IT application. The firm did not perform procedures to test the design and operating effectiveness of this control beyond observing the control owner perform a point in time logical access review. (AS 2301.16)

The issuer used an information technology (IT) application to process inventory transactions and calculate inventory costs. To reduce the extent of its substantive procedures over the valuation of inventory the firm tested and placed reliance on certain application controls. The following deficiencies were identified: · The firm selected for testing a logical access control over this IT application. The firm identified a control deficiency in its testing of this control but did not evaluate the severity of this deficiency and its effect on its control risk assessment. (AS 2301.34)

The issuer used an information technology (IT) application to process inventory transactions and calculate inventory costs. To reduce the extent of its substantive procedures over the valuation of inventory the firm tested and placed reliance on certain application controls. The following deficiencies were identified: · The firm did not identify and test any controls related to program changes for this IT system. (AS 2301.16)

The firm did not perform sufficient substantive procedures to test the valuation of inventory as follows: · The sample size the firm used in certain of its substantive procedures to test the valuation of inventory was 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)

The firm did not perform sufficient substantive procedures to test the valuation of inventory as follows: · The firm did not perform any procedures to test or sufficiently test controls over the accuracy and completeness of certain system-generated data that it used to substantively test the valuation of inventory. (AS 1105.10)

The firm did not perform any procedures to test certain significant assumptions used by the issuer to determine the cost of certain inventory. (AS 2501.16)

The firm selected for testing controls that consisted of management's reviews of system-generated reports used to determine the (1) amount of labor and overhead capitalized into inventory and (2) inventory obsolescence reserve. The firm did not identify and test any controls over the accuracy and completeness of the system-generated reports used in the operation of these controls. (AS 2201.39)

The firm selected for testing controls that consisted of management's reviews of system-generated reports used to determine the (1) amount of labor and overhead capitalized into inventory and (2) inventory obsolescence reserve. 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's approach for substantively testing the amount of labor and overhead costs capitalized into inventory and the slow-moving and obsolete inventory reserve was to review and test management's processes. The firm did not evaluate the reasonableness of the capitalized labor and overhead costs and the slow-moving and obsolete inventory reserve because the firm did not perform procedures to test certain methods and assumptions the issuer used to capitalize such costs and determine the reserve. (AS 2501.09 .10 and .11)

The firm did not perform procedures to test beyond inquiry of management the inventory reserve for excess and obsolete inventory. (AS 2501.07)

The issuer maintains inventory at multiple locations and performs physical inventory counts at year end. The following deficiencies were identified: · For one location the firm did not (1) project the misstated results of its sample to the items from which the sample was selected and (2) consider the nature and cause of misstatements identified in the sample of items tested to determine whether there could be additional errors. (AS 2315.26 and .27)

The issuer maintains inventory at multiple locations and performs physical inventory counts at year end. The following deficiencies were identified: · For another location the firm's counts identified a significant number of misstatements and the firm determined the issuer had not performed a year-end physical inventory count. The issuer then performed a physical inventory count ('subsequent count'). The firm did not perform any testing of the subsequent count or any other procedures to determine the effectiveness of the method used by the issuer to perform the subsequent count and the reliance that could be placed upon the issuer's representations of quantities and physical condition of inventories at that location. (AS 2510.09)

The firm did not perform sufficient procedures to test the valuation of inventories because it did not: · Perform any procedures to evaluate whether inventory was measured at the lower of cost or net realizable value at certain locations. (AS 2501.07)

The firm did not perform sufficient procedures to test the valuation of inventories because it did not: · Perform any procedures to test or test any controls over the accuracy and completeness of the bill of materials reports. (AS 1105.10)

The firm did not perform sufficient procedures to test the valuation of inventories because it did not: · Perform sufficient procedures to test the material costs in work-in-process (WIP) finished goods (FG) and raw materials because it did not perform any procedures to test certain sampled items and limited its procedures for certain other sampled items to comparing the items to a prior-year inventory listing. (AS 2301.08)

The firm did not perform sufficient procedures to test the valuation of inventories because it did not: · Perform any procedures to test or test any control over the accuracy and completeness of the number of labor hours used by the issuer to determine the labor costs allocated to WIP and FG. (AS 1105.10)

The firm did not perform sufficient procedures to test the valuation of inventories because it did not: · Perform substantive procedures to test the allocation of overhead costs and the percentage of completion estimate beyond recalculation and inquiry of management. (AS 2501.07)

The firm did not perform sufficient procedures to test the valuation of inventories because it did not: · Perform procedures to test the inventory reserve beyond comparing the year-end inventory reserve balance to the prior year amount. (AS 2501.07)

The firm did not test shipping terms of inventory purchased from a foreign supplier for inventory received subsequent to year end. (AS 2301.08)

The firm did not perform any substantive procedures to test the cost of inventory. (AS 2301.08)

The firm did not perform sufficient procedures to test the existence of certain inventory at year end. Specifically the firm's observation procedures were not suitable because they did not provide any evidence of the quantity and physical condition of the inventory. (AS 2510.09)

For inventory at one subsidiary the firm did not make or observe any physical counts of the inventory. (AS 2510.12 and .13)

For inventory at another subsidiary the firm performed inventory observations subsequent to year end. The firm did not test or in the alternative test any controls over the accuracy and completeness of the system-generated reports it used to test intervening transactions between the dates of its inventory observations and year end. (AS 1105.10)

For inventory at a third subsidiary the firm performed inventory observations subsequent to year end. The firm did not test any intervening transactions between the date of its inventory observations and year end. (AS 2510.12 and .13)

To test the existence of inventory the firm selected a sample of items biased towards high-dollar value individual items. The firm did not perform any procedures to test the remaining population of inventory. (AS 2315.24)

To test the existence of inventory the firm selected a sample of items biased towards high-dollar value individual items. The firm did not perform any procedures to test the cost of inventory. (AS 2301.08)

To substantively test the valuation of inventory the firm developed an independent expectation with respect to certain inventory. The following deficiencies were identified: - The firm did not perform any procedures to test the valuation of inventory that was not included in its independent expectation. (AS 1105.27; AS 2301.08)

To substantively test the valuation of inventory the firm developed an independent expectation with respect to certain inventory. The following deficiencies were identified: - The firm did not perform any procedures to demonstrate it had a reasonable basis for certain assumptions it developed. (AS 2501.22)

To substantively test the valuation of inventory the firm developed an independent expectation with respect to certain inventory. The following deficiencies were identified: - The firm did not perform procedures beyond inquiry to evaluate the reasonableness of certain assumptions it used that the issuer developed. (AS 2501.24)

To substantively test the valuation of inventory the firm developed an independent expectation with respect to certain inventory. The following deficiencies were identified: - The firm did not perform any procedures to evaluate the relevance and reliability of certain assumptions it obtained from an external appraiser. (AS 1105.04 and .06; AS 2501.23)

To substantively test the valuation of inventory the firm developed an independent expectation with respect to certain inventory. The following deficiencies were identified: - The firm did not perform any substantive procedures to test the completeness of certain data it used. (AS 2501.24)