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)

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 (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)

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)

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 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)

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.