Explorer

The issuer recognized revenue from multiple revenue sources. The following deficiencies were identified with respect to the firm's ICFR audit: • The firm selected for testing a control that consisted of the issuer's review of a sample of customer invoices to verify the pricing information reflected in the selected invoices. The firm did not identify and test any controls over the completeness of the population the issuer used to select invoices for review in the operation of this control. (AS 2201.39) In connection with our review the issuer reevaluated its controls over revenue including IT controls and concluded that additional material weaknesses existed that had not been previously identified. The issuer subsequently reflected these additional material weaknesses in a revision to its report on ICFR and the firm revised and reissued its report on ICFR to include these additional material weaknesses.

The issuer recognized revenue from multiple revenue sources. The following deficiencies were identified with respect to the firm's ICFR audit: • The firm did not identify and test any controls over certain revenue. (AS 2201.39) In connection with our review the issuer reevaluated its controls over revenue including IT controls and concluded that additional material weaknesses existed that had not been previously identified. The issuer subsequently reflected these additional material weaknesses in a revision to its report on ICFR and the firm revised and reissued its report on ICFR to include these additional material weaknesses.

The issuer recognized revenue from multiple revenue sources. The following deficiencies were identified with respect to the firm's ICFR audit: • The firm selected for testing two other controls that consisted of the issuer's review of a sample of customer invoices to verify the pricing and other information reflected in the selected invoices. The firm did not identify and test any controls over the completeness of the population the issuer used to select invoices for review in the operation of these controls. (AS 2201.39) In connection with our review the issuer reevaluated its controls over revenue including IT controls and concluded that additional material weaknesses existed that had not been previously identified. The issuer subsequently reflected these additional material weaknesses in a revision to its report on ICFR and the firm revised and reissued its report on ICFR to include these additional material weaknesses.

The issuer recognized revenue from multiple revenue sources. The following deficiencies were identified with respect to the firm's ICFR audit: • The firm selected for testing various automated controls that consisted of the configuration of the information technology (IT) system to automatically perform certain functions based on pre-established parameters. The firm's testing of these automated controls was not sufficient because the firm did not evaluate the program logic of these controls beyond obtaining certain documentation from the vendor or perform other procedures that would have provided sufficient appropriate audit evidence that these controls were designed and operating effectively. (AS 2201.42 and .44) In connection with our review the issuer reevaluated its controls over revenue including IT controls and concluded that additional material weaknesses existed that had not been previously identified. The issuer subsequently reflected these additional material weaknesses in a revision to its report on ICFR and the firm revised and reissued its report on ICFR to include these additional material weaknesses.

The issuer recognized revenue from multiple revenue sources. The following deficiencies were identified with respect to the firm's ICFR audit: • The firm did not identify and test controls that addressed certain risks of material misstatement related to certain revenue. (AS 2201.39) In connection with our review the issuer reevaluated its controls over revenue including IT controls and concluded that additional material weaknesses existed that had not been previously identified. The issuer subsequently reflected these additional material weaknesses in a revision to its report on ICFR and the firm revised and reissued its report on ICFR to include these additional material weaknesses.

The issuer generally recognized revenue for two categories of revenue. The firm selected for testing controls over one category of revenue that consisted of a monthly review of revenue recognition and a quarterly review over financial statement line items. For the monthly review control the firm did not evaluate whether the control was designed to ensure all relevant revenue recognition criteria had been met. (AS 2201.42 and .44)

For the second category of revenue the firm did not identify and test any controls over revenue recognition. (AS 2201.39)

For one category of revenue the firm selected for testing an automated application control over the generation of customer invoices and recording of revenue. The firm did not test the configuration of the automated control or perform other procedures that would have provided sufficient appropriate audit evidence that the automated control was designed and operating effectively. (AS 2201.42 and .44)

The firm tested certain controls over revenue at an interim date. The firm did not perform any procedures to update the results of that testing from the interim date to year end. (AS 2201.55)

The firm selected for testing a control over the timing of revenue recognition. The firm however did not directly test the control because its procedures which consisted of determining that revenue was not recorded before goods were shipped for a sample of transactions were substantive in nature. (AS 2201.B9)

The firm did not identify and test any controls other than certain cut-off controls over the issuer's revenue transactions for certain types of revenue. (AS 2201.39)

For one type of revenue the issuer's system generated customer invoices and recorded revenue once the issuer processed invoices from the manufacturer of its products indicating that customer orders had been completed and shipped. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of support for revenue transactions. In testing the operating effectiveness of this control the firm did not test the aspect related to whether the manufacturer's invoices processed by the issuer were consistent with the customers' orders. (AS 2201.44)

For one type of revenue the issuer's system generated customer invoices and recorded revenue once the issuer processed invoices from the manufacturer of its products indicating that customer orders had been completed and shipped. The following deficiencies were identified: · The firm selected for testing an automated control over the generation of a customer invoice and the recording of revenue once the manufacturer's invoice was processed in the issuer's system. The firm did not obtain an understanding of how the issuer's system was configured to initiate process and record revenue transactions. As a result the firm did not test the configuration of this control or perform other procedures that would have provided sufficient appropriate audit evidence that the control was designed and operating effectively. (AS 2201.34 .42 and 44)

The issuer used multiple service organizations to host and/or maintain IT systems that the issuer used to initiate process and/or record transactions related to various types of revenue at five other business units. The firm obtained the service auditor's reports for these service organizations and identified certain complementary user controls that the service auditor's reports described as necessary. The following deficiencies were identified: · The firm identified control deficiencies related to several complementary user controls that consisted of the issuer's (1) granting and removal of access to these IT systems and/or (2) monitoring of computer operations. The firm did not evaluate the effect of these deficiencies on the issuer's ability to meet control objectives stated in the service auditor's reports. (AS 2201.62 and .B22)

The issuer used multiple service organizations to host and/or maintain IT systems that the issuer used to initiate process and/or record transactions related to various types of revenue at five other business units. The firm obtained the service auditor's reports for these service organizations and identified certain complementary user controls that the service auditor's reports described as necessary. The following deficiencies were identified: · The firm did not perform any procedures to evaluate whether the issuer had implemented certain of these controls. (AS 2201.39 and .B22)

The issuer used multiple service organizations to host and/or maintain IT systems that the issuer used to initiate process and/or record transactions related to various types of revenue at five other business units. The firm obtained the service auditor's reports for these service organizations and identified certain complementary user controls that the service auditor's reports described as necessary. The following deficiencies were identified: · The firm did not identify that certain of these controls were not designed to satisfy the control objectives described in certain of the service auditor's reports. (AS 2201.42 and .B22)

The firm subjected certain other of the issuer's business units to less extensive audit procedures. The following deficiencies were identified: · To address the risks of material misstatement related to revenue for these business units the firm selected for testing controls that included the issuer's comparisons and reviews of the (1) budget to actual results and (2) prior-period actual results to current-period actual results. The firm did not identify and test any controls over the review of the budget used in the operation of one of these controls. (AS 2201.39)

The firm's internal inspection program inspected this audit and reviewed the Revenue and Business Combination areas but did not identify the deficiencies below. The firm obtained the service auditor's reports for these service organizations and identified certain complementary user controls that the service auditor's reports described as necessary. The following deficiencies were identified: · The firm identified control deficiencies related to various complementary user controls that consisted of the issuer's reviews of user access to these IT systems. The firm did not sufficiently evaluate the severity of these control deficiencies because it did not evaluate or fully evaluate the magnitude of the potential misstatements resulting from these deficiencies. (AS 2201.62 and .B22)

The firm's internal inspection program inspected this audit and reviewed the Revenue and Business Combination areas but did not identify the deficiencies below. The firm obtained the service auditor's reports for these service organizations and identified certain complementary user controls that the service auditor's reports described as necessary. The following deficiencies were identified: · With respect to change management the firm did not test the design and operating effectiveness of certain complementary user controls that the service auditor's report described as necessary. (AS 2201.39 and .B22)

The firm's internal inspection program inspected this audit and reviewed the Revenue and Business Combination areas but did not identify the deficiencies below. For revenue at this business unit which was affected by the audit deficiencies discussed above the following additional deficiencies related to the firm's testing of controls were identified: · The firm identified various control deficiencies in its testing of controls. The firm did not perform sufficient procedures to evaluate the severity of these control deficiencies because it did not evaluate the magnitude of the potential misstatements resulting from the deficiencies. (AS 2201.62)

The firm's internal inspection program inspected this audit and reviewed the Revenue and Business Combination areas but did not identify the deficiencies below. For revenue at this business unit which was affected by the audit deficiencies discussed above the following additional deficiencies related to the firm's testing of controls were identified: · The firm identified multiple misstatements in its substantive testing. The firm did not evaluate whether the misstatements it identified should have had an effect on the firm's conclusion about the effectiveness of the issuer's controls. (AS 2201.B8)

The firm's internal inspection program inspected this audit and reviewed the Revenue and Business Combination areas but did not identify the deficiencies below. For revenue at this business unit which was affected by the audit deficiencies discussed above the following additional deficiencies related to the firm's testing of controls were identified: · For one type of revenue the firm did not identify and test any controls that addressed whether the performance obligation was satisfied before revenue was recognized. (AS 2201.39)

The firm's internal inspection program inspected this audit and reviewed the Revenue and Business Combination areas but did not identify the deficiencies below. For revenue at this business unit which was affected by the audit deficiencies discussed above the following additional deficiencies related to the firm's testing of controls were identified: · The firm selected for testing a control that included the issuer's review of the accuracy of pricing information used to record this first type of revenue. The firm did not identify and test any controls over the accuracy of certain information used in the operation of this control. (AS 2201.39)

The issuer used several information-technology (IT) systems to process and record certain revenue at one business unit. The following deficiencies were identified: · The firm selected for testing controls that consisted of the issuer's review of price list changes processed through certain of the issuer's IT systems. The firm did not test or test any controls over the completeness of the population of items from which it selected its samples for testing these controls. (AS 1105.10)

The issuer used several information-technology (IT) systems to process and record certain revenue at one business unit. The following deficiencies were identified: · The firm did not identify and test any controls that addressed whether pricing was accurately applied in the recording of revenue. (AS 2201.39)

The issuer recognized revenue from certain contracts over time using an input method based on costs incurred. The following deficiencies were identified: · The firm used certain labor information in its substantive testing of the costs incurred but did not test or test controls over the accuracy of this information. (AS 1105.10)

The issuer recognized revenue from certain contracts primarily based on sales data. The firm selected controls over revenue for testing that included the use of sales data. The firm's work papers included an adjustment the issuer recorded to previously recognized revenue due to inaccurate sales data. In evaluating the design of the controls selected for testing the firm did not assess the effect of inaccurate sales data on whether the controls could effectively prevent or detect a material misstatement. (AS 2201.42)

The firm identified multiple deficiencies in the issuer's controls over revenue that it had selected for testing. The firm did not evaluate the severity of each control deficiency to determine whether the deficiency individually or in combination with other deficiencies constituted a material weakness. (AS 2201.62)

The firm did not identify and test any controls over the initial recording of certain sales in the issuer's sales systems. (AS 2201.39)

For certain automated controls over revenue the firm tested a sample of one transaction for each control in the issuer's IT testing environment rather than in its production environment. The firm's testing of certain of these controls was not sufficient because the firm did not perform any procedures to determine whether the testing environment was consistent with the production environment. (AS 2201.44)For certain automated controls over revenue the firm tested a sample of one transaction for each control in the issuer's IT testing environment rather than in its production environment. The firm's testing of certain of these controls was not sufficient because the firm did not perform any procedures to determine whether the testing environment was consistent with the production environment. (AS 2201.44)

The firm selected for testing a control that consisted of a review of quarterly adjustments to revenue for two products. The firm did not test the design and operating effectiveness of certain aspects of this review control that addressed one of the products. (AS 2201.42 and .44)

The firm did not (1) obtain an understanding of the likely sources of potential misstatement of revenue (AS 2201.34)

The firm did not (2) identify and test process level controls over the issuer's revenue (AS 2201.39)

The firm did not identify and test any controls over the recognition of the amount of straight-line rent and related revenue. (AS 2201.39)

The firm selected for testing a control over the review of lease classifications. The firm did not identify and test any controls over the accuracy of certain issuer-prepared information used in the operation of this control. (AS 2201.39)

The firm selected for testing certain controls that included the review of revenue. The following deficiency was identified: · For certain revenue the firm did not identify and test any controls over the timing of the revenue recognition. (AS 2201.39)

The firm selected for testing a control that consisted of management's review of an annual analysis of the revenue recognized by the issuer using revenue data shipment dates and delivery dates (collectively 'data'). The firm did not evaluate the 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 selected for testing a control over certain revenue that consisted of the automated generation of a customer invoice and recognition of related revenue upon shipment of goods. The firm did not test the configuration of the system or any instances of the control that occurred during the year (AS 2201.42 and .44)

For one of the issuer's reporting units: · The issuer uses an application to record invoices and the resulting revenue and generate revenue reports. The firm did not identify and test any controls (1) over the completeness of information used in the operation of these controls and (2) that addressed the risk of developers migrating unapproved changes to production. (AS 2201.39)

The firm selected for testing a control that consisted of a review of all changes made to customer data including sales prices within the subsidiary's system. The firm did not identify and test any controls over the completeness of customer data included in a report used in the operation of this control. (AS 2201.39)

The component reported revenue from multiple revenue types and for purposes of the audit the firm grouped revenue into three categories. The following deficiencies were identified: · The firm did not evaluate the effect of the (1) differences identified between the shipping dates and dates in which revenue was recognized and (2) inconsistencies in the component's revenue recognition practices for sales arrangements with a single performance obligation both as described above on the effectiveness of the component's ICFR or report such matters to the principal auditor for its evaluation. (AS 2201.B8)

For certain revenue the customer purchase order information is transferred from customers to the issuer's enterprise resource planning system (ERPS) through a service organization. For certain other revenue customer purchase order and shipment information are aggregated by other service organizations and transferred to the issuer's ERPS. The following deficiency was identified: · The firm selected for testing certain controls over revenue that consisted of the issuer's (1) review of certain information transmitted from one of the service organizations to its ERPS and (2) reconciliation of information transmitted from another service organization to its ERPS. The firm did not identify and test any controls over the accuracy and/or completeness of certain information used in the operation of these controls. (AS 2201.39)

For certain revenue the issuer received customer orders electronically that were processed through its sales system. The firm selected for testing various automated controls over the processing of orders generation of invoices and recording of revenue. The firm obtained an understanding of the system's configuration settings but did not test whether these automated controls were designed and operating effectively. (AS 2201.42 and .44)

For certain revenue the firm did not identify and test any controls over the accuracy of sales order prices manually entered into the sales system and quantities shipped and/or invoiced to customers. (AS 2201.39)

The issuer manually entered sales order quantities into the issuer's revenue system. This system was programmed to convert the quantities entered into weight sold to determine the customer invoice amount. The following deficiencies were identified: · The firm selected for testing controls that consisted of comparisons of the total weight of inventory shipped to (1) the weight of the products ordered by customers and (2) the weight information the issuer used to generate customer invoices. The firm did not identify and test any controls over the accuracy of the weight information used in the operation of these controls. (AS 2201.39)

The issuer manually entered sales order quantities into the issuer's revenue system. This system was programmed to convert the quantities entered into weight sold to determine the customer invoice amount. The following deficiencies were identified: · The firm selected for testing controls over the accuracy of sales prices that consisted of a review of sales order prices below a minimum price and above certain maximum prices. The firm did not identify and test any controls over the accuracy of prices that did not meet these criteria. (AS 2201.39)

The issuer manually entered sales order quantities into the issuer's revenue system. This system was programmed to convert the quantities entered into weight sold to determine the customer invoice amount. The following deficiencies were identified: · For certain other revenue the firm identified a control deficiency related to a lack of controls over the accuracy of quantities shipped to customers and recorded as revenue. The firm identified various controls that it believed would compensate for this deficiency but its conclusion that these controls had a mitigating effect was inappropriate because these controls did not address the risk of potential misstatement related to inaccurate quantities. (AS 2201.68) As a result of our inspection procedures the firm reevaluated the issuer's controls over this revenue and concluded along with the issuer that certain control deficiencies existed that constituted a material weakness that had not been previously identified. The issuer subsequently filed a Form 8-K and disclosed that the firm's opinion related to the effectiveness of the issuer's ICFR should no longer be relied upon due to this material weakness and the material weakness discussed above.

The firm identified control deficiencies in the issuer's sales process related to segregation of duties conflicts and individuals having inappropriate access to the issuer's revenue system that provided these users with the ability to create and modify customer accounts enter sales orders and record adjustments to accounts receivable. The firm identified and tested various compensating controls including controls that the issuer implemented in response to these control deficiencies. The following audit deficiencies were identified: For the compensating controls the firm did not evaluate the implications of certain control owners having segregation of duties conflicts and/or inappropriate access to the revenue system. (AS 2201.68).

For one of its business units the issuer entered into revenue arrangements with multiple performance obligations and allocated the total transaction price for each arrangement to the separate performance obligations on a relative standalone selling price basis. The following deficiencies were identified: · For certain revenue recorded from these arrangements the firm did not identify and test any controls that addressed whether the individual prices for goods sold were agreed to by customers prior to recording revenue under FASB ASC Topic 606. (AS 2201.39)

For one of its business units the issuer entered into revenue arrangements with multiple performance obligations and allocated the total transaction price for each arrangement to the separate performance obligations on a relative standalone selling price basis. The following deficiencies were identified: · For certain of these revenue transactions the firm did not identify and test any controls that addressed whether the quantities shipped and invoiced by the issuer represented quantities ordered by customers. (AS 2201.39)