Explorer

To evaluate the reliability of certain external information the firm used to test revenue the firm sent a positive confirmation request to the external party and received an electronic response. The firm did not consider performing procedures to address the risks associated with the electronic response such as verifying the source and contents of the confirmation response. (AS 2310.29)

The firm sent confirmation requests to a sample of customers and a majority of the confirmation responses received were provided to the firm after having been initially received by the issuer. The firm did not maintain control over the confirmation requests and responses through direct communication between the firm and the intended recipients of the confirmation requests. (AS 2310.28)

To test certain revenue the firm (1) confirmed certain revenue transactions and received two confirmations back with exceptions (2) selected revenue transactions above a threshold and a sample of transactions below that threshold for detail testing and (3) performed cut-off testing. The firm did not evaluate the nature of exceptions on the two returned confirmations. (AS 2310.33)

To test certain revenue the firm (1) confirmed certain revenue transactions and received two confirmations back with exceptions (2) selected revenue transactions above a threshold and a sample of transactions below that threshold for detail testing and (3) performed cut-off testing. In determining its sample size for transactions below the threshold for detail testing the firm did not take into account the tolerable misstatement for the population and the allowable risk of incorrect acceptance. (AS 2315.16 .19 .23 and .23A)

The firm selected for confirmation a sample of revenue transactions. The firm emailed the franchisees the confirmation request and received electronic responses. The firm did not consider performing procedures to address the risk associated with electronic responses beyond verifying the correspondent's name was consistent with the authorized respondent's name. (AS 2310.29)

The issuer had three categories of revenue that were derived from contractual agreements with varying terms and conditions that could affect the amount and timing of revenue to be recognized. The following deficiencies were identified: · The firm's substantive procedures to test one category of revenue consisted of confirming accounts receivable at year end and testing the first five shipments after year end. These procedures did not provide sufficient appropriate audit evidence because the procedures (1) only addressed revenue recorded close to year end and (2) did not include testing of whether revenue recognition criteria had been met. (AS 2301.08)

The firm selected for testing controls over revenue including certain automated controls related to the initiation processing and recording of revenue. The automated controls included (1) a three-way match between the customer purchase order bill of lading and invoice and (2) the generation of nightly exception reports. Certain of these automated controls included a manual element that consisted of the confirmation of shipment by warehouse staff. The firm's approach to testing these controls was to test a single transaction. The following deficiencies were identified: · The firm did not evaluate whether each automated control was configurable and if so whether each control was configured appropriately within the system and as a result the firm's testing of these automated controls using a sample of only one instance was not sufficient. (AS 2201.42 and .44)

The firm selected for testing controls over revenue including certain automated controls related to the initiation processing and recording of revenue. The automated controls included (1) a three-way match between the customer purchase order bill of lading and invoice and (2) the generation of nightly exception reports. Certain of these automated controls included a manual element that consisted of the confirmation of shipment by warehouse staff. The firm's approach to testing these controls was to test a single transaction. The following deficiencies were identified: · The firm did not test all relevant scenarios of the automated controls to ensure the system processed transactions as designed for all scenarios. (AS 2201.42 and .44)

The firm selected for testing controls over revenue including certain automated controls related to the initiation processing and recording of revenue. The automated controls included (1) a three-way match between the customer purchase order bill of lading and invoice and (2) the generation of nightly exception reports. Certain of these automated controls included a manual element that consisted of the confirmation of shipment by warehouse staff. The firm's approach to testing these controls was to test a single transaction. The following deficiencies were identified: · The firm did not perform any procedures to test the manual element of the controls. (AS 2201.42 and .44)

The firm selected for testing controls over revenue including certain automated controls related to the initiation processing and recording of revenue. The automated controls included (1) a three-way match between the customer purchase order bill of lading and invoice and (2) the generation of nightly exception reports. Certain of these automated controls included a manual element that consisted of the confirmation of shipment by warehouse staff. The firm's approach to testing these controls was to test a single transaction. The following deficiencies were identified: · The firm did not identify and test any controls over the review of the system-generated exception reports resulting from the three-way match control. (AS 2201.39)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. To test certain revenue the firm relied on confirmations from customers. The issuer's sales personnel directly contacted the customers and obtained customer signatures as proof of customer receipt of goods purchased. The issuer provided the firm with the signed confirmations. The firm did not maintain control over the confirmation requests and responses through direct communication between the firm and the intended recipients of the confirmation requests. (AS 2310.28)

The firm sent positive confirmation requests to the issuer's customers for a sample of certain revenue transactions. For positive confirmations that were not returned the firm did not perform alternative procedures that provided sufficient appropriate audit evidence that the delivery of services had occurred for those selections. (AS 2310.31)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. The firm sent positive confirmation requests to a sample of customers as part of its testing of revenue. The following deficiency was identified: · The firm did not perform procedures to determine whether certain of the confirmation requests were directed to third parties who were knowledgeable about the information to be confirmed. (AS 2310.26)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. The firm sent positive confirmation requests to a sample of customers as part of its testing of revenue. The following deficiency was identified: · The firm received an electronic response to one confirmation request. The firm did not consider performing procedures to address the risks associated with an electronic response such as verifying the source and contents of the confirmation response. (AS 2310.29)

The issuer recorded certain revenue based on transactions that occurred on applications maintained by external parties. The following deficiencies were identified: · To test a third type of revenue the firm sent positive confirmation requests to the external parties that maintained the applications. The firm's confirmation procedures were not sufficient because the firm did not consider whether the external parties would have the information necessary to confirm that the issuer's performance obligations had been satisfied. (AS 2310.26)

The issuer recorded certain revenue based on transactions that occurred on applications maintained by external parties. The following deficiencies were identified: · To test a third type of revenue the firm sent positive confirmation requests to the external parties that maintained the applications. For the items for which the requested confirmations were not returned the firm did not perform alternative procedures that provided sufficient appropriate audit evidence that the recorded amounts of revenue were accurate as of the confirmation date. (AS 2310.31)

The issuer recorded certain revenue based on data in an electronic environment that were tracked by an IT system. To test this revenue the firm (1) sent positive confirmation requests to the issuer's customers with revenue over an established threshold and (2) selected a sample of transactions for testing. The following deficiencies were identified: · The firm's confirmation procedures were not sufficient because the firm did not consider whether the issuer's customers would have the information necessary to confirm that the issuer's performance obligations had been satisfied. (AS 2310.26)

The issuer recorded certain revenue based on data in an electronic environment that were tracked by an IT system. To test this revenue the firm (1) sent positive confirmation requests to the issuer's customers with revenue over an established threshold and (2) selected a sample of transactions for testing. The following deficiencies were identified: · The firm did not evaluate whether the transaction prices allocated to the issuer's performance obligations were based on standalone selling prices. (AS 2301.08 and .13)

To test the occurrence of revenue throughout the year at certain of the issuer's business units the firm's procedures included testing revenue transactions 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 to address the risks of material misstatement related to the occurrence of this revenue because these procedures which included confirming accounts receivable at year end performing cut-off testing at year end and testing credit memoranda after year end were primarily focused on the occurrence of revenue at a point in time. As a result the nonstatistical samples were too small to provide sufficient appropriate audit evidence to address the risks of material misstatement related to occurrence of this revenue throughout the year. (AS 2301.37 and .42; AS 2315.19 .23 and .23A)

The firm did not perform sufficient procedures to test whether the issuer satisfied its performance obligations for a second type of revenue because it limited its procedures to (1) obtaining cash receipts and sales invoices and (2) sending negative confirmations to a respondent who was a related party without considering the respondent's objectivity and freedom from bias and whether the response that was received by the firm provided meaningful and appropriate evidence. (AS 2301.08 and .13; AS 2310.26 and .27)

The firm sent a positive confirmation request to one of the issuer's customers for total revenue for the year and accounts receivable at year end. The customer did not respond to the aspect of the confirmation request related to revenue. The firm did not perform alternative procedures. (AS 2310.31)

The issuer used certain IT systems to process and record transactions related to revenue. The following deficiency was identified: · The firm's approach for testing revenue included sending confirmation requests to a sample of the issuer's customers. The firm did not consider performing procedures to address the risks associated with electronic responses such as verifying the source and contents of the confirmation responses. (AS 2310.29)

The issuer used certain IT systems to process and record transactions related to revenue. The following deficiency was identified: · The firm's approach for testing revenue included sending confirmation requests to a sample of the issuer's customers. The issuer electronically sent the confirmation requests to the customers on behalf of the firm and the firm received the responses to the confirmation requests electronically. The firm did not maintain control over the confirmation requests through direct communication with the intended recipients of the confirmation requests. (AS 2310.28)