Explorer

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 performed procedures to test the accuracy and completeness of certain system-generated reports that the issuer used to estimate the reserve for excess and obsolete inventory. The extent of these procedures was not sufficient because the firm used the incorrect amount to calculate its samples of items to test from these reports. (AS 1105.10)

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 issuer used an IT system to initiate process and record transactions related to revenue and inventory. In its testing of controls over these accounts the firm tested various IT-dependent manual controls that used data and reports generated or maintained by this IT system. The firm did not identify and test controls that addressed whether the level of access provided to users was appropriate. (AS 2201.39)

The issuer used an IT system to initiate process and record transactions related to revenue and inventory. In its testing of controls over these accounts the firm tested various IT-dependent manual controls that used data and reports generated or maintained by this IT system. As a result of the deficiency in the firm's testing of ITGCs the firm's testing of these IT-dependent manual controls was not sufficient. (AS 2201.46)

The firm selected for testing certain controls that consisted of the issuer's review of the (1) allocation of labor and overhead costs to inventory and (2) reserve for excess and obsolete inventory. The firm did not identify and test any controls over the accuracy and completeness of certain information used in the operation of these controls. (AS 2201.39)

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 a control that consisted of the automated recording of inventory at standard cost and the issuer's review of variances between actual and standard costs. The firm did not test the automated aspect of this control. Further the firm did not evaluate the review procedures that the control owner performed related to the review of variances 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 issuer's review of the classification of inventory between raw materials work-in-process and finished goods. 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 perform procedures to test or test any controls over the completeness of a system-generated report that the firm used (1) to make its selections to test a control over the recording of inventory upon receipt and (2) in its substantive testing of inventory cut-off. (AS 1105.10)

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 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)

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)

The firm selected for testing a control over the issuer's review of the reserve for excess and obsolete inventory at one business unit. The firm did not identify and test any controls over the accuracy and completeness of certain information 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 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 inventory at three business units one of which was affected by additional audit deficiencies the following deficiencies were identified: · The sample sizes the firm used in certain of its substantive procedures to test 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 deficiencies in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

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)

Due to the deficiency discussed above the firm did not obtain 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)

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 one of these locations the firm obtained an inventory listing from a date subsequent to the issuer's physical count. The firm did not inspect any records of the issuer's counts and apply appropriate tests of intervening transactions between the date of the issuer's counts and the date of the inventory listing. (AS 2510.12)

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)

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)

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)

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's sample size for testing the existence of this inventory was too small to provide sufficient appropriate audit evidence because in determining the sample size the firm did not take into account tolerable misstatement and the allowable risk of incorrect acceptance. (AS 2315.16 .23 and .23A)

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

The firm's substantive procedures to test the cost of certain inventory consisted of selecting a sample of items for testing. The sample size the firm used 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 as it did not take into account that one of the controls it relied upon was ineffective. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The issuer used a service organization to host and maintain an IT system that the issuer used to initiate process and record transactions related to revenue and inventory. In its testing of controls over these accounts the firm tested certain automated and/or IT-dependent manual controls that used data and reports generated or maintained by this IT system. As a result of the following deficiency in the firm's testing of ITGCs the firm's testing of these automated and IT-dependent manual controls was not sufficient. (AS 2201.46)

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 firm's approach for substantively testing one component of the issuer's reserve for excess and obsolete inventory was to test the issuer's process. The firm did not sufficiently evaluate the reasonableness of a significant assumption the issuer used because the firm did not (1) take into account the issuer's ability to carry out this assumption (2) take into account changes in conditions and events affecting the issuer and (3) evaluate significant differences between this assumption and the issuer's historical experience. (AS 2501.16 and .17)

The firm used a system-generated report in its substantive procedures to test the remainder of the issuer's reserve for excess and obsolete inventory. The firm relied on its testing of the accuracy and completeness of this report that was performed in the prior year. The firm did not perform sufficient procedures to test or sufficiently test controls over the accuracy and completeness of this report because it did not take into account that user access controls over this IT system were ineffective. (AS 1105.10)

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 issuer reported a reserve for inventory. The firm selected for testing a control that included a review of certain assumptions used to determine the reserve for individual inventory items. The firm did not evaluate the specific review procedures that the control owners performed to evaluate the reasonableness of the assumptions. (AS 2201.42 and .44) 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.

With respect to Inventory the firm's approach for substantively testing the reserve was to test the issuer's process. The firm did not perform any procedures to evaluate whether the method used to develop the reserve was appropriate. (AS 2501.10) 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.

With respect to Inventory the firm's approach for substantively testing the reserve was to test the issuer's process. The firm did not perform procedures to evaluate the reasonableness of certain significant assumptions beyond inquiry and performing a retrospective analysis. (AS 2501.16) 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.

For certain inventory the firm's approach for substantively testing the reserve for excess and obsolete (E&O) inventory was to test the issuer's process. The firm did not evaluate the reasonableness of certain significant assumptions the issuer used to develop the E&O reserve. (AS 2501.16)

For certain inventory the firm's approach for substantively testing the reserve for excess and obsolete (E&O) inventory was to test the issuer's process. For certain other inventory the firm did not perform any procedures to test the E&O reserve. (AS 2501.07)

The firm's substantive procedures to test the unit cost of certain manufactured inventory consisted of (1) selecting a sample of inventory items for testing and (2) performing substantive analytical procedures. The following deficiencies were identified: · For the items selected for testing the firm did not perform sufficient procedures to test the cost of the raw materials because its procedures were limited to comparing certain of these costs to system-generated reports. (AS 2301.08)

The firm's substantive procedures to test the unit cost of certain manufactured inventory consisted of (1) selecting a sample of inventory items for testing and (2) performing substantive analytical procedures. The following deficiencies were identified: · For the substantive analytical procedures the firm did not determine whether the expectations it used in these analytical procedures were based on predictable relationships. Further the firm identified differences in excess of the firm's established threshold but did not evaluate certain of these differences beyond in some instances inquiring of management. (AS 2305.13 .14 and .21)

The firm's substantive procedures to test the reserve for excess and obsolete (E&O) inventory included selecting a sample of inventory items for testing. The following deficiencies were identified: · The firm did not perform any procedures to test or test any controls over the accuracy and completeness of certain issuer-produced reports used in these substantive procedures. (AS 1105.10)

The firm's substantive procedures to test the reserve for excess and obsolete (E&O) inventory included selecting a sample of inventory items for testing. The following deficiencies were identified: · For certain of its selections the firm did not perform any procedures to test the sales forecast that the issuer used to develop the E&O reserve. (AS 2501.07)

The firm's substantive procedures to test the reserve for excess and obsolete (E&O) inventory included selecting a sample of inventory items for testing. The following deficiencies were identified: · For certain other selections the firm did not perform procedures beyond inquiring of management to test the issuer's conclusion that an E&O reserve was not necessary. (AS 2501.07)

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)