Explorer

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 a control that consisted of the issuer's review of its assessment of long-lived assets for possible impairment including the underlying cash-flow forecasts. The firm did not identify and test any controls over the accuracy of certain data that were used in the operation of this control. (AS 2201.39)

For long-lived assets the following additional deficiency related to the firm's testing of controls were identified: the firm used the work of the issuer's internal audit as evidence of the operating effectiveness of certain controls selected for testing over long-lived assets. The firm or the issuer's internal audit did not perform procedures beyond inquiry to evaluate whether these controls could effectively prevent or detect material misstatements. Further the issuer's internal audit tested these controls through an interim date but the firm did not perform any procedures to update the results of that testing from that interim date to year end. (AS 2201.42 .44 and .55)

The firm did not identify and test any controls over the capitalization of interest costs associated with the construction of certain long-lived assets. (AS 2201.39) Unrelated to our review the issuer reevaluated its controls over the capitalization of these interest costs and concluded that a material weakness existed that had not been previously identified. The issuer subsequently revised its report on ICFR to reflect this material weakness and the firm modified its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report.

The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to certain revenue and long-lived assets. The issuer outsourced its IT operations to a third-party service organization including the operation of certain IT automated controls ('ITACs'). The transaction data processed through these IT systems and the IT systems themselves which were maintained by the service organization were owned by the issuer. The firm selected for testing various ITACs over certain revenue and long-lived assets. The firm used the work of the service organization's auditor ('service auditor') as evidence of the design and operating effectiveness of these ITACs whereby the firm provided guidance to the service auditor related to the testing of these ITACs and the firm obtained the service auditor's report which described the service auditor's testing procedures and results. The firm did not perform sufficient procedures to test the design and operating effectiveness of these ITACs because the firm did not identify that the service auditor had not performed procedures to (1) test the design of these ITACs and (2) evaluate program customizations to support the use of a 'test of one' approach to test the operating effectiveness of these ITACs. (AS 2201.42 and .44)

The issuer used multiple IT systems to initiate process and record transactions related to certain revenue and long-lived assets. The following deficiencies were identified: · The firm did not test or in the alternative test controls over the completeness of the population of changes that were processed internally by the issuer's IT personnel and that the firm used in its testing of the controls over change management. (AS 1105.10)

The firm did not identify and test any controls over long-lived assets and depreciation expense. (AS 2201.39)

The firm selected for testing a control that consisted of the issuer's review of potential indicators of impairment for its long-lived assets and certain investments. The firm did not evaluate whether the thresholds that the control owner used to identify certain impairment indicators were sufficiently precise to prevent or detect material misstatements. (AS 2201.42)

The firm selected for testing a control that consisted of the issuer's review of potential indicators of impairment for its long-lived assets and certain investments. The firm did not identify and test any controls over the accuracy and/or completeness of certain data used in the operation of this control. (AS 2201.39)

The issuer performed a quantitative impairment assessment of certain long-lived assets and investments that had impairment indicators. The firm used certain issuer-produced data in its substantive testing of this impairment assessment but did not test or test any controls over the accuracy of these data. (AS 1105.10)

The firm did not identify and test any controls over the identification of impairment indicators with respect to property plant and equipment ('PP&E'). Further the firm did not identify and test any controls over the determination of depreciation expense related to certain PP&E. (AS 2201.39)

The firm did not identify and test any controls over the (1) recording of additions and disposals of long-lived assets including whether these were recorded in the correct period (2) classification of long-lived assets and whether these were depreciated over the appropriate useful lives and (3) configuration of the system responsible for the calculation of depreciation expense. (AS 2201.39)

The firm selected for testing a control that consisted of the issuer's review and approval of an authorization for expenditure form for the acquisition of long-lived assets. The firm did not identify and test any controls that addressed whether long-lived assets were appropriately capitalized. (AS 2201.39)

The issuer had determined during the first and second quarters that one of its properties was not impaired based on the results of analyses that it had performed in those quarters to determine whether the carrying value of the property was recoverable. The firm did not identify and test any controls over these analyses. (AS 2201.39)

The issuer capitalized certain employee and contractor labor costs to long-lived assets. The following deficiencies were identified: · The firm did not identify and test any controls over the accuracy of the employee labor hours associated with the employee labor costs capitalized to long-lived assets. (AS 2201.39)

The firm selected for testing a review control over purchases and disposals of long-lived assets. The firm did not test the aspect of this control related to the control owner's review of the summary of activity or transaction details supporting the control. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the issuer's reviews of its assessments of long-lived assets for possible impairment. For the first business unit the firm did not test the operating effectiveness of this control. (AS 2201.44)

For long-lived assets which were affected by the audit deficiency discussed above related to change management the following additional deficiency was identified: The firm selected for testing certain automated controls over the purchase of long-lived assets that consisted of the (1) matching of invoices approved purchase orders and receiving/inspection reports related to acquired long-lived assets (2) recording of liabilities through unbilled payables for all goods and services received through the system and (3) approval of purchase orders in accordance with an approved authorization matrix. The firm did not test the design and operating effectiveness of these controls over one of the instances of the issuer's ERP system. (AS 2201.42 and .44)

The firm also selected for testing certain review controls over long-lived assets and related transactions. The following deficiency was identified: · For a control over asset-related disclosures in the financial statements the firm did not identify and test any controls over the accuracy of reports and schedules used in the operation of the control beyond testing one control over the useful life data discussed above. (AS 2201.39)

The firm did not identify and test any controls over the issuer's classification of certain long-lived assets. (AS 2201.39)

The firm did not identify and test any controls over the issuer's review of long-lived assets for indicators of potential impairment. (AS 2201.39)

Long-lived assets were assessed as having a significant risk. The firm relied on control testing performed by management to assess the operating effectiveness of certain controls over long-lived assets. A member of management who performed the control testing was also the control owner of the controls selected for testing. The firm did not evaluate the objectivity of the member of management who performed the control testing and whether its reliance on management's control testing work was appropriate. (AS 2201.18; AS 2605.10)

The firm selected for testing a control related to management's review and approval of purchases of long-lived assets. The firm did not identify and test any controls that addressed the completeness of the purchase invoices used in the operation of the control. (AS 2201.39)