Explorer

The issuer used a service organization for recordkeeping and processing of transactions related to certain other investment securities. The firm obtained a service auditor's report but did not assess how the controls that the service auditor tested related to the issuer's controls. Further the firm did not perform any procedures beyond inquiring of management to ascertain whether there were any changes in the service organization's controls from the date of this service auditor's report which was eight months before the issuer's year end. (AS 2201.B21 .B24 and .B25)

The issuer managed a portion of its investment securities portfolio and used external parties to manage the remaining portion. The issuer used one service organization to perform recordkeeping and processing of all investment transactions and a second service organization to maintain custody of the overall portfolio. With respect to the custodial service organization the firm obtained a service auditor's report and identified certain complementary user controls that the service auditor's report described as necessary. The firm did not perform any procedures to evaluate whether the issuer had implemented these controls. (AS 2201.39 and .B22)

The issuer managed a portion of its investment securities portfolio and used external parties to manage the remaining portion. The issuer used one service organization to perform recordkeeping and processing of all investment transactions and a second service organization to maintain custody of the overall portfolio. With respect to information received from the recordkeeping service provider the following deficiencies were identified: · The firm did not identify and test any controls over the relevance and reliability of the pricing information the issuer received from this service organization and used to record the fair values of the investment securities the issuer managed. (AS 2201.39)

The firm did not identify and test any controls over the issuer's determination of the categorization of its available-for-sale (AFS) securities within the fair value hierarchy as set forth in FASB ASC Topic 820 Fair Value Measurement. (AS 2201.39)

The firm selected for testing a control that consisted of the issuer's review of the fair values of a sample of AFS securities. The firm did not assess whether the extent and timing of the issuer's review was sufficient to address the risks of material misstatement. Further the firm did not evaluate whether the items identified for follow up by the control owner were appropriately resolved. (AS 2201.42 and .44)

The issuer reported investment securities that were held within various investment funds managed by external parties. The following deficiency was identified: • The firm selected for testing a control that consisted of the issuer's review of the fair values of these investments. The firm did not identify and test any controls that addressed the reliability of pricing information obtained from the external parties that were used in the operation of this control. (AS 2201.39)

The firm selected for testing a control that consisted of the review of the categorization of AFS securities within the fair value hierarchy as set forth in FASB ASC Topic 820 Fair Value Measurement. The firm did not evaluate the specific procedures that the control owner performed to assess the appropriateness of the categorization within the fair value hierarchy. (AS 2201.42 and .44)

The issuer held investment securities that it classified based on original maturity as either cash equivalents or short-term investments in its financial statements. The firm did not identify and test any controls that addressed the appropriateness of the classification of these investments. (AS 2201.39)

The firm selected for testing two controls over the issuer's determination of the categorization of the securities within the fair value hierarchy as set forth in FASB ASC Topic 820 Fair Value Measurement. The firm did not identify that these controls were not designed to address whether the pricing inputs used to determine the fair value of certain securities were observable. (AS 2201.42)

The firm selected for testing a control that consisted of a committee's review of securities to determine whether they met certain quantitative or qualitative factors that would indicate that these securities should be evaluated for possible impairment. The firm did not test an aspect of the control that addressed whether securities that met certain of those qualitative factors were identified for evaluation. (AS 2201.42 and .44)

The firm did not identify and test any controls over the observability of the pricing inputs at the individual instrument level that the issuer used to determine the categorization of certain of its investment securities within the fair value hierarchy as set forth in FASB ASC Topic 820 Fair Value Measurement. (AS 2201.39)

The firm did not identify and test any controls over the issuer's valuation and presentation and disclosure of certain investment securities. (AS 2201.39)

The issuer recorded the fair values of certain of its available-for-sale (AFS) securities based on broker quotes. The following deficiencies were identified: · The firm did not identify and test any controls over the observability of the pricing inputs at the individual instrument level that the issuer used to determine the categorization of these securities within the fair value hierarchy as set forth in FASB ASC Topic 820. (AS 2201.39)

The firm did not identify and test any controls over the issuer's amortization of premiums and accretion of discounts on its investment securities. (AS 2201.39)

For AFS securities for which prices could not be obtained the issuer used the original purchase price to approximate fair value. The firm did not identify and test any controls that addressed whether the issuer's use of purchase price was an appropriate approximation of fair value for these AFS securities. (AS 2201.39)

During the year the issuer completed a business combination where the issuer's operations from before the transaction remained on the issuer's existing information systems (“legacy systems”) and continued to be recorded in these systems separately from the other company's operations. The issuer used a manually prepared spreadsheet to compare the fair values recorded for its available-for-sale and held-to-maturity securities to prices obtained from various sources. The firm selected for testing controls over the review of this spreadsheet but when evaluating the design of these controls did not identify that the control owner did not perform any procedures that addressed whether the pricing information that was included in the spreadsheet was accurate and complete. (AS 2201.42)

The issuer used two service organizations for custody record keeping and the processing of investment transactions and those service organizations used sub-service organizations for certain functions. The service auditors' reports did not address the controls over the sub-service organizations. The firm did not obtain an understanding of and test any controls at the sub-service organizations that were relevant to the issuer. (AS 2201.39 and .B19)

The firm selected for testing a complementary user control that consisted of monthly cash and investment reconciliations but did not test the aspect of this control related to investments. (AS 2201.B22)

The firm did not identify and test any controls over the issuer's allowance for credit impairment for certain investment securities. (AS 2201.39)

The issuer held a portfolio of investments which were carried at fair value. The following deficiencies were identified: · The firm selected for testing another control that consisted of a review of the issuer's determination of the fair value hierarchy classification of investments. The firm did not test an aspect of this control over the observability of the pricing inputs used to determine the fair value hierarchy classification of the investments. (AS 2201.39)