Explorer

The issuer reported right-of-use assets and lease liabilities. The issuer performed a recoverability test to determine whether these assets were impaired that included cash flows for years beyond the terms of the leases. The firm's approach for substantively testing the recoverability test was to test the issuer's process. The firm did not sufficiently evaluate whether any of the issuer's leases met the criteria for classification as finance leases in conformity with FASB ASC Topic 842 Leases because the firm did not perform procedures to determine whether (1) the lease term is for the major part of the remaining economic life of the underlying asset and (2) the present value of the of the lease payments exceeds substantially all of the fair value of the underlying asset. (AS 2301.08)

The issuer reported right-of-use assets and lease liabilities. The issuer performed a recoverability test to determine whether these assets were impaired that included cash flows for years beyond the terms of the leases. The firm's approach for substantively testing the recoverability test was to test the issuer's process. The firm did not perform any substantive procedures to evaluate the reasonableness of the discount rate the issuer used to develop the estimate of lease liabilities. (AS 2501.16)

The issuer reported right-of-use assets and lease liabilities. The issuer performed a recoverability test to determine whether these assets were impaired that included cash flows for years beyond the terms of the leases. The firm's approach for substantively testing the recoverability test was to test the issuer's process. The firm did not perform any substantive procedures to determine whether the issuer developed the discount rate in conformity with FASB ASC Topic 842. (AS 2301.08)

The issuer reported right-of-use assets and lease liabilities. The issuer performed a recoverability test to determine whether these assets were impaired that included cash flows for years beyond the terms of the leases. The firm's approach for substantively testing the recoverability test was to test the issuer's process. The firm did not sufficiently evaluate the reasonableness of cash flow projections used in the issuer's recoverability test because it did not take into account the issuer's ability to carry out the cash flow projections including its ability to generate cash flows for the years after the end of the terms of the leases. (AS 2501.16 and .17)

The issuer reported right-of-use assets and lease liabilities. The issuer performed a recoverability test to determine whether these assets were impaired that included cash flows for years beyond the terms of the leases. The firm's approach for substantively testing the recoverability test was to test the issuer's process. The firm did not perform sufficient procedures to test whether the issuer had identified all of the lease arrangements because it did not perform any procedures to test the completeness of the issuer's list of leases. (AS 1105.10)

The firm did not identify and test any controls over right of use assets and lease obligations. (AS 2201.39)

During the audit the firm did not identify and evaluate the significance to the financial statements of misstatements related to lease expense information included in a required disclosure under FASB ASC Topic 842 Leases. (AS 2810.30 and .31)

The issuer used a specialist to estimate the issuer's oil and gas reserves that were used in the valuation of properties for which oil and gas reserves had been assigned. The issuer produced certain information that was (1) used in the firm's testing of revenue and lease operating expenses and (2) provided to the company's specialist. The firm did not perform any procedures to test or test controls over the accuracy and/or completeness of this information. (AS 1105.10 and .A8a)

The firm used certain information produced by a related party in its testing of revenue and lease operating expenses but did not perform any procedures to evaluate the reliability of this information. (AS 1105.04 and .06)

The issuer recognized certain revenue based on product volumes delivered to its customers and accounted for certain of these arrangements as operating leases. The following deficiencies were identified: · The firm identified a control deficiency related to the issuer's lack of controls over the accuracy of the volume data. The firm used these volume data in its substantive testing of this revenue but did not perform any procedures to test the accuracy and completeness of these data. (AS 1105.10)

The issuer recognized certain revenue based on product volumes delivered to its customers and accounted for certain of these arrangements as operating leases. The following deficiencies were identified: · The firm did not identify and test any controls that addressed whether the issuer's classification of certain arrangements as operating leases was appropriate. (AS 2201.39)

The issuer engaged specialists to determine the fair value of certain leased assets using various data and assumptions. The following deficiencies were identified: · The firm did not perform procedures to (1) test the accuracy and completeness of issuer-produced data used by the company's specialists and (2) evaluate the relevance and reliability of external information used by one of the company's specialists. (AS 1105.A8a)

The issuer engaged specialists to determine the fair value of certain leased assets using various data and assumptions. The following deficiencies were identified: · The firm did not evaluate the reasonableness of significant assumptions used by the company's specialists. (AS 1105.A8b)

The issuer used (1) store-level operating results to evaluate whether any impairment indicators existed for its long-lived assets including lease right-of-use assets and (2) store-level cash-flow forecasts to evaluate the recoverability of certain of these assets. The issuer excluded certain costs from these analyses. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's reviews of these operating results and cash-flow forecasts. The firm did not evaluate the specific review procedures that the control owner performed to assess the appropriateness of excluding these costs. (AS 2201.42 and .44)

The issuer used (1) store-level operating results to evaluate whether any impairment indicators existed for its long-lived assets including lease right-of-use assets and (2) store-level cash-flow forecasts to evaluate the recoverability of certain of these assets. The issuer excluded certain costs from these analyses. The following deficiencies were identified: · The firm used these operating results in its substantive procedures to evaluate whether any impairment indicators existed for these assets. The firm did not evaluate whether these excluded costs were directly associated with the identified asset groups. (AS 2301.08)

The issuer used (1) store-level operating results to evaluate whether any impairment indicators existed for its long-lived assets including lease right-of-use assets and (2) store-level cash-flow forecasts to evaluate the recoverability of certain of these assets. The issuer excluded certain costs from these analyses. The following deficiencies were identified: · The firm's approach for substantively testing the recoverability of certain of these assets was to test the issuer's process. The firm did not evaluate whether the issuer's method to determine the recoverability of these assets using cash-flow forecasts that excluded these costs was in conformity with FASB ASC Topic 360 Property Plant and Equipment. (AS 2501.10)

In the current year the issuer identified events indicating that its operating lease right-of-use assets may not be recoverable and performed an impairment analysis. The issuer determined that for certain of these assets (the 'valued assets') the fair value of the individual assets would not be impaired by more than a pre-determined percentage of the asset's recorded value (a 'maximum impairment percentage'). The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of its assessment of these assets for possible impairment. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of the maximum impairment percentage. (AS 2201.42 and .44)

In the current year the issuer identified events indicating that its operating lease right-of-use assets may not be recoverable and performed an impairment analysis. The issuer determined that for certain of these assets (the 'valued assets') the fair value of the individual assets would not be impaired by more than a pre-determined percentage of the asset's recorded value (a 'maximum impairment percentage'). The following deficiencies were identified: · The firm's substantive procedures to evaluate the reasonableness of the maximum impairment percentage consisted of reading the issuer's external valuation report for certain other operating lease right-of-use assets and an external industry report. The firm did not perform procedures to evaluate whether the information in these reports was (1) relevant to the valued assets and (2) precise enough to enable the firm to identify potential material misstatements. Further the firm did not perform any procedures to evaluate whether the issuer's use of the same maximum impairment percentage for all of the valued assets was appropriate. (AS 2502.26 .28 and .31)

During the year the issuer identified misstatements in its accounting for certain leases and control deficiencies associated with these misstatements. The following audit deficiency was identified: · The firm did not evaluate the severity of these control deficiencies individually or in combination to determine whether they represented a material weakness. (AS 2201.62)

During the year the issuer identified misstatements in its accounting for certain leases and control deficiencies associated with these misstatements. The following audit deficiency was identified: · The firm performed substantive procedures to test certain of these misstatements but did not test or test any controls over the completeness of the lease data that the issuer used to calculate these misstatements. (AS 1105.10)

The sample sizes the firm used in certain of its substantive procedures to test leases 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 firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiency below. The issuer used store-level operating results to evaluate whether any impairment indicators existed for its operating lease right-of-use assets and to perform an impairment analysis. The following deficiency was identified: · The firm selected for testing a control that included the issuer's reviews of the accuracy and completeness of these operating results and this impairment analysis. When evaluating the design of this control the firm did not evaluate the number of items the control owner reviewed to assess whether it was sufficient to address the risks of material misstatement. Further the firm did not identify that the control owner did not assess whether these operating results were accurately entered into this impairment analysis. (AS 2201.42)

The firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiency below. The issuer used store-level operating results to evaluate whether any impairment indicators existed for its operating lease right-of-use assets and to perform an impairment analysis. The following deficiency was identified: · The firm used these operating results in its substantive testing of the potential impairment of these lease right-of-use assets but did not perform any procedures to test or sufficiently test controls over the accuracy and completeness of these operating results. (AS 1105.10)

During the year the issuer entered into an amendment to an existing lease agreement. The firm did not identify and evaluate that the issuer's accounting for this lease amendment was not in conformity with FASB ASC Topic 842 Leases. (AS 2810.30)

The firm selected for testing a control that consisted of the issuer's review of the accounting for certain lease transactions. The firm did not identify and test any controls over the accuracy and completeness of a report used in the operation of this control. (AS 2201.39)

The firm's internal inspection program had inspected this audit reviewed these areas and also identified the deficiencies below. The firm performed substantive procedures to test the accuracy of a schedule that the issuer used to prepare certain of its lease disclosures. The sample size the firm used in these substantive procedures was smaller than the one the firm determined necessary to provide sufficient appropriate audit evidence. Further the firm did not perform any procedures to test or test any controls over the completeness of this schedule. (AS 1105.10)

The firm selected for testing a control that included the issuer's review of forecasts used in the issuer's analysis of possible impairment of operating lease right-of-use assets. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the revenue growth rates that the issuer used in these forecasts. (AS 2201.42 and .44)

The firm selected for testing controls that included the issuer's reviews of new and amended lease agreements and the reconciliation of the lease asset balance from the lease sub-ledger to the general ledger. The firm did not identify and test any controls over the accuracy and completeness of the lease information that was used in the operation of these controls. (AS 2201.39)

The firm did not identify and test any controls that addressed the valuation of certain right-of-use assets. (AS 2201.39)

The firm did not perform any substantive procedures to test the valuation of these right-of-use assets. (AS 2301.08)

During the year the issuer entered into various lease transactions. The firm did not identify and evaluate the issuer's omission of certain disclosures related to these transactions that were required under FASB ASC Topic 842 Leases. (AS 2810.30 and .31)

The firm tested controls that included the issuer's review of forecasts used in its analysis of possible impairment of its operating lease right-of-use assets and determined that they were ineffective because an aspect of these controls was not operating effectively. The firm concluded that this deficiency represented a significant deficiency primarily based on its conclusion that the remaining aspect of these controls was operating effectively. The firm did not sufficiently evaluate whether this deficiency represented a material weakness because in its testing of this remaining aspect the firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of certain revenue forecasts that the issuer used in its analysis. (AS 2201.62)

The firm did not perform any substantive procedures to test the issuer's long-lived assets and operating lease right-of-use assets for possible impairment at year end beyond reading an issuer-prepared checklist and inquiring of management. (AS 2301.08)

A service organization provided lease administration and accounting software services to the issuer using a lease application. An unrelated party entered all of the issuer's lease data and assumptions into the lease application and the issuer was responsible for the accuracy and completeness of such information. The firm selected for testing certain controls that consisted of the issuer's review of journal entries used to record lease activity and account reconciliations related to leases. The firm did not identify and test any controls over the accuracy and completeness of the lease information used in the operation of these controls. (AS 2201.39)

The firm selected for testing two controls that consisted of the issuer's (1) evaluation of its leases for potential implications with respect to the accounting for its leases upon adoption of FASB ASC Topic 842 Leases and (2) review of the disclosures related to that adoption. The firm did not evaluate the specific review procedures that the control owner performed to evaluate the completeness of the population of leases that should have been subject to these controls. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the issuer's quarterly review of its lease contracts for appropriate accounting treatment subsequent to the issuer's adoption of FASB ASC Topic 842 Leases. The firm did not test the aspect of this control that addressed the completeness of the population of leases used in the operation of the control. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of a reconciliation of the lease asset and liability balances from the lease sub-ledger to the general ledger. The firm did not identify and test any controls over the accuracy of the lease information included in manually-prepared spreadsheets that the control owners used in the operation of this control. (AS 2201.39)

The firm selected for testing a control that included the review of the issuer's accounting for leases for conformity with FASB ASC Topic 842 Leases. 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's procedures to test the outstanding balances of certain commercial loans and leases included confirmation procedures based on a nonstatistical sampling approach that was designed assuming a certain level of substantive evidence the firm planned to obtain from its other substantive procedures. These other substantive procedures did not provide the planned level of substantive evidence because these procedures were limited to testing account reconciliations and a small number of loans and leases. As a result the nonstatistical samples were too small to provide sufficient appropriate audit evidence over these commercial loan and lease balances. (AS 2301.42; AS 2315.19 .23 and .23A)

The issuer disclosed that it had certain leases that had been executed by year end but had not yet commenced. The firm did not perform any procedures to evaluate whether any of these leases should have been recorded as right-of-use assets and lease liabilities at year end. (AS 2301.08)

To evaluate the issuer's classification of leases as operating or financing the firm tested a sample of current-year lease additions but did not perform any procedures to test the fair values of the underlying assets that the issuer used in determining the leases' classification. (AS 2301.08)

The firm used issuer-prepared schedules in its substantive testing of certain of the issuer's lease disclosures but did not perform any procedures to test or test any controls over the accuracy and completeness of these schedules. (AS 1105.10)

During the year the issuer entered into a lease amendment. The firm did not evaluate whether the issuer's accounting for certain terms of this amendment as a new lease commencing in the subsequent year was in conformity with FASB ASC Topic 842 Leases. (AS 2810.30)

The firm's internal inspection program had inspected this audit and reviewed Revenue but did not identify the deficiency below. The firm did not identify and evaluate the issuer's omission of certain required disclosures related to FASB ASC Topic 606 Revenue from Contracts with Customers and FASB ASC Topic 842 Leases. (AS 2810.30 and .31) In connection with our review the issuer reevaluated its revenue and lease disclosures and determined certain disclosures were omitted. The issuer did not file an amended Form 10-K or a Form 8-K indicating that its previously issued financial statements should not be relied on. Instead the issuer corrected these omissions in a subsequent filing.

During the year the issuer acquired several properties. The firm did not evaluate whether the existing leases on these acquired properties were properly classified. (AS 2301.08)

The firm's approach for substantively testing the present value of operating lease right-of-use assets and operating lease liabilities was to review and test management's process. The firm did not perform any procedures to evaluate the reasonableness of the discount rate used to determine the present value. (AS 2501.09 .10 and .11) [This citation refers to AS 2501 Auditing Accounting Estimates which was in effect for this audit. This standard was replaced by AS 2501 Auditing Accounting Estimates Including Fair Value Measurements which became effective for audits of financial statements ending on or after December 15 2020.]

The firm did not perform procedures to test the accuracy and completeness of certain disclosures related to operating leases. (AS 2301.08)