Explorer

The firm selected for testing various controls over revenue and inventory but did not identify and test any controls over the accuracy and completeness of certain system-generated data or reports that were used in the operation of these controls. (AS 2201.39)

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. As a result of the deficiencies in the firm's testing of IT general controls the firm's testing of this automated control was not sufficient. (AS 2201.46)

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 a control over user access to these IT systems but did not perform procedures to test or test any controls over the accuracy and completeness of certain reports that the firm used in its testing. (AS 1105.10)

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 firm's internal inspection program had inspected this audit reviewed these areas and also identified the deficiencies below. The firm did not identify and test any controls that addressed the risk related to the accuracy and completeness of data transferred from the issuer's inventory subledger to the general ledger. (AS 2201.39)

The firm's internal inspection program had inspected this audit reviewed these areas and also identified the deficiencies below. The firm selected for testing controls over the calculation of the issuer's excess and obsolete inventory reserve and inventory unit costs. The firm did not identify and test any controls over the accuracy and completeness of certain system-generated data or reports that were used in the operation of these controls. (AS 2201.39)

The firm's internal inspection program had inspected this audit reviewed these areas and also identified the deficiencies below. As a result of the firm's control testing deficiencies 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 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. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm's internal inspection program had inspected this audit reviewed these areas and also identified the deficiencies below. As a result of the firm's control testing deficiencies the firm did not perform sufficient substantive procedures to test the valuation of inventory as follows: · The firm did not perform procedures to test or test any controls over the accuracy and/or completeness of certain system-generated data or reports that the firm used in its substantive testing. (AS 1105.10)

The firm selected for testing a control that consisted of the issuer's review of standard costs for its inventory items. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of the standard costs included in the issuer's inventory system. (AS 2201.42 and .44)

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)

For in-transit inventory and freight included in inventory the firm did not perform procedures to test or test any controls over the accuracy and completeness of certain system-generated data or reports the firm used in its substantive testing including its substantive analytical procedures. (AS 1105.10; AS 2305.16)

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 perform procedures to evaluate the reasonableness of a significant assumption the issuer used to develop the E&O reserve beyond reading an issuer-prepared memorandum. (AS 2501.16) Unrelated to our review the issuer reevaluated its accounting for its inventory and concluded that material misstatements existed that had not been previously identified. The issuer corrected these misstatements in a restatement of its financial statements in a subsequent filing.

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 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 sample size the firm used in certain of its substantive procedures to test this E&O reserve 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 deficiency in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm's approach for substantively testing the E&O reserve was to test the issuer's process. The firm did not sufficiently evaluate the reasonableness of certain significant assumptions the issuer used to develop the E&O reserve because the firm did not perform procedures beyond inquiring of management to evaluate certain significant differences between these assumptions and the issuer's recent experience. (AS 2501.16)

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

The issuer held certain inventory at locations owned by external parties. The firm performed confirmation procedures to test the existence of this inventory but did not maintain control over the confirmation requests because the issuer sent the requests. (AS 2310.28)

With respect to certain of the issuer's inventory disclosures the following deficiencies were identified: · The firm selected for testing a control that included the issuer's review of its financial statement disclosures but did not test the aspect of the control that addressed the accuracy and completeness of the issuer-prepared schedules used to prepare these inventory disclosures. (AS 2201.42 and .44)

With respect to certain of the issuer's inventory disclosures the following deficiencies were identified: · The firm used these issuer-prepared schedules in its substantive testing of these inventory disclosures but did not test or sufficiently test controls over the accuracy and completeness of these schedules. (AS 1105.10)

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 firm did not perform any procedures to test or test any controls over the accuracy and completeness of certain data and reports used in its substantive testing of inventory. (AS 1105.10)

The firm's approach for substantively testing the issuer's inventory reserve was to test the issuer's process. The firm did not perform any procedures beyond reading an issuer-prepared memorandum and inquiring of management to evaluate the reasonableness of the significant assumptions the issuer used to determine this reserve. (AS 2501.16)

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 had inspected this audit and reviewed these areas and did not identify the deficiencies below. The firm selected for testing certain controls over inventory. Except for certain of the selected items that were part of the firm's walkthroughs the firm did not test the specific review procedures that the control owners performed over certain aspects of these controls beyond inspecting for evidence of the control owners' approval. (AS 2201.44)

The firm's substantive procedures to test certain inventory costs consisted of analytical procedures. The firm did not perform procedures to obtain evidence that the expectations it used would be predictive of the inventory costs as of year end. (AS 2305.13 and .14)

The firm's substantive procedures to test certain inventory costs consisted of analytical procedures. The firm did not test or in the alternative test controls over the accuracy and completeness of the data it used to develop its expectations. (AS 2305.16)

The firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiencies below. The firm selected for testing controls over inventory but did not identify and test any controls over the accuracy and completeness of certain system-generated data or reports that the control owners used in the operation of these controls. (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 firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiencies below. As a result of the firm's control testing deficiencies discussed above the firm did not perform sufficient substantive procedures as follows: · 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. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiencies below. As a result of the firm's control testing deficiencies discussed above the firm did not perform sufficient substantive procedures as follows: · The firm did not perform procedures to test or sufficiently test controls over the accuracy and completeness of a system-generated report that it used in its substantive testing of inventory. (AS 1105.10)

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)

Outside custodians held certain of the issuer's inventory. The firm did not perform sufficient procedures to test the existence of this inventory because it limited its procedures to the roll forward described above and positive confirmation requests with the outside custodians. Further the firm did not perform procedures to compare the quantities of inventory included in the confirmation responses to the quantities in the issuer's records. (AS 2301.08; AS 2510.14)

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 received an electronic response to one of its confirmation requests related to the purchase of inventory that was received from a different email address than the contact email address included in the issuer's contracts with the vendor. The firm did not consider performing procedures to verify the source of the response. (AS 2310.29)

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)

For certain excess inventory that the issuer determined did not require a reserve the firm did not perform any procedures beyond inquiring of management to evaluate the reasonableness of the issuer's forecasted usage of this inventory. (AS 2501.24)

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

The firm's approach to substantively test the excess and obsolete inventory reserve was to develop an independent expectation. The firm did not perform any procedures to test or in the alternative test any controls over the accuracy and completeness of a report generated from the issuer's inventory management system and used to develop its expectation. (AS 1105.10)

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 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)

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 sample sizes the firm used in certain of its substantive procedures to test the valuation of 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 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)