Explorer

The firm identified certain of the issuer's locations as “in-scope” locations for purposes of testing controls over the revenue. The firm selected for testing certain controls over the processing and recording of the revenue that consisted of the issuer's review and/or approval of (1) the detail sales price list (2) sales price and other information in contracts (3) certain sales reports and (4) changes in estimated contract costs. The following deficiencies were identified: · For two of these controls both of which involved the issuer's review of estimated revenue and contract costs the firm did not evaluate the specific review procedures that the control owners performed to assess the appropriateness of these estimates. (AS 2201.42 and .44)

The firm selected for testing controls over revenue consisting of reviews of (1) monthly reports used to record sales and (2) quarterly sales adjustments. The firm did not evaluate the review procedures that the control owners performed including the criteria the control owners used to identify items for follow up and whether those items were appropriately resolved. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the review of new contracts and certain changes to existing contracts. 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 issuer used a service organization to process certain revenue. The firm selected for testing controls that consisted of the issuer's reviews of analyses supporting revenue deduction accruals for this revenue. The firm did not evaluate the specific review procedures that the control owners performed to assess the accuracy of the sales deduction rates used in the analyses. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the issuer's review of invoices for certain revenue. The firm did not evaluate the specific review procedures the control owners performed with respect to reviewing the accuracy and completeness of labor hours which were an input into the issuer's calculation of this revenue. (AS 2201.42 and .44)

The issuer recognized certain revenue from contracts using a measure of progress method. The following deficiencies were identified: · The firm selected for testing controls over the review and approval of certain of this revenue. The firm did not evaluate the review procedures that the control owners 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 that included monthly reviews of certain revenue for four of the issuer's business units. The firm did not evaluate the review procedures that the control owners 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)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling price. The issuer disclosed that it used observable prices to determine the standalone selling prices for certain performance obligations in these arrangements. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of certain standalone selling prices. The firm did not evaluate the specific review procedures that the control owner performed to conclude that the prices the issuer used to determine the standalone selling prices for these performance obligations were observable. (AS 2201.42 and .44)

For this type of revenue the issuer entered into arrangements where it could either be acting in the capacity of a principal or an agent and as a result would record revenue on either a gross or net basis. The following additional deficiencies were identified: · For one business unit the firm selected for testing a control that included the issuer's review of changes to prices in the issuer's IT system for existing customers. The firm did not evaluate the specific review procedures that the control owner performed to assess the accuracy of these price changes. (AS 2201.42 and .44)

The issuer recorded revenue net of customer rebates and other deductions. The following deficiency was identified: · The firm selected for testing a control that consisted of the issuer's review of the reconciliation between net revenue and cash receipts. The firm did not evaluate the specific review procedures that the control owner performed to assess certain adjustments between net revenue and cash receipts. (AS 2201.42 and .44)

With respect to change management the firm selected for testing a control over the issuer's review of changes to the production environments for these IT systems. 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 issuer processed and recorded revenue transactions using its general ledger system. The firm tested certain automated and information technology ('IT')-dependent manual controls that used data and reports generated by or maintained in the general ledger system. The firm's approach to test the accuracy and completeness of these data and reports depended on effective IT general controls ('ITGCs'). In response to an ineffective ITGC over the issuer's general ledger system the firm selected for testing a compensating control that consisted of a review of system changes. 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 a result the firm's testing of these automated and IT-dependent manual controls over these areas was not sufficient. (AS 2201.46 and .68)

The firm selected for testing two controls over the review of revenue. The firm did not evaluate the review procedures that the control owners performed including the procedures to identify items for follow up and the procedures to determine whether those items were appropriately resolved. Further the firm did not perform procedures to test whether the controls were operating as designed. (AS 2201.42 and .44)

The firm selected for testing certain review controls over revenue. The firm did not evaluate the specific review procedures that the control owners performed to evaluate the appropriateness of the (1) timing of revenue recognition and (2) price changes from the issuer's system. (AS 2201.42 and .44)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. The firm selected for testing certain controls over revenue. The following deficiency was identified: · For certain management review controls the firm did not evaluate the specific review procedures that the control owners 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 issuer reported revenue from the sale of products. The following deficiencies were identified: - The firm selected for testing a control that included reviews of product pricing. The firm did not evaluate the review procedures that certain of the control owners performed including the criteria that the control owners used to identify items for follow up and whether those items were appropriately resolved. Further the firm did not test the design and operating effectiveness of another aspect of this control. (AS 2201.42 and .44)

The issuer reported revenue from the sale of products. The following deficiencies were identified: - The firm selected for testing a control that included the review of price overrides. The firm did not test the specific review procedures that the control owner performed to evaluate the appropriateness of price changes. (AS 2201.42 and .44)

The firm's internal inspection program inspected this audit and reviewed the revenue area but did not identify the deficiency below. The issuer used multiple service organizations to host and/or maintain information technology (IT) systems that the issuer used to initiate process and record transactions related to this revenue. · The firm selected for testing complementary user controls that consisted of the issuer's reviews of user access to these IT systems. The firm did not evaluate the specific review procedures that the control owners performed to determine whether previously granted access continued to be appropriate. (AS 2201.42 .44 and .B22)

The firm's internal inspection program inspected this audit and reviewed this area but did not identify certain of the deficiency below. For another type of revenue that included an estimate of variable consideration in the transaction price the following deficiency was identified: · The firm selected for testing a control that consisted of the issuer's review of certain assumptions used to determine this estimate. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of these assumptions. (AS 2201.42 and .44)

The firm relied on controls it selected for testing in its approach to testing revenue at two of the issuer's business units. The following deficiencies were identified: · For the second business unit the firm selected for testing a control that consisted of the issuer's review of sales transactions included in the general ledger. The firm's testing of this control was not sufficient because the firm did not directly test the review procedures that the control owner performed. (AS 2301.19 .21 and .23)

The firm selected for testing controls that consisted of the issuer's reviews of gross margins estimates of revenue deductions and customer shipments and invoices. The firm did not evaluate the review procedures that the control owners performed including the procedures to identify items for follow up and/or the procedures to determine whether those items were appropriately resolved. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the issuer's review and approval of customer price changes. The firm did not evaluate the specific review procedures that the control owners performed to assess the appropriateness of the price changes and whether they were appropriately approved. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the issuer's review of a significant assumption used to develop a reserve for certain customer discounts. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of this assumption. (AS 2201.42 and .44)

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: · With respect to firm's testing of the control over the review of sales orders discussed above the firm did not evaluate the review procedures that the control owners 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 controls that consisted of reviews of a spreadsheet used to accumulate actual costs incurred and total estimated contract costs and calculate revenue recognized by contract. The firm did not evaluate the review procedures that the control owners 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 internal inspection program had inspected this audit and reviewed these areas and did not identify the deficiencies below. The firm selected for testing a control over revenue. Except for one of the selected items that was part of the firm's walkthrough the firm did not test the specific review procedures that the control owner performed over certain aspects of this control beyond inspecting for evidence of the control owners' approval. (AS 2201.44)

The firm selected for testing a control that consisted of the component's review of topside journal entries related to revenue recognition. 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 selected for testing a control that consisted of the issuer's monthly comparison of revenue by customer to revenue recorded in the prior month and the investigation of variances over an established threshold. The firm did not evaluate the specific review procedures that the control owner performed to investigate identified variances and determine whether items identified for follow-up had been appropriately resolved. (AS 2201.42 and .44)

The issuer generated certain revenue at numerous locations from sales of multiple types of products. The firm selected for testing controls over this revenue that included (1) reviews of each location's monthly operating results and (2) reviews of monthly and year-to-date revenue for each type of product. The firm did not evaluate the specific review procedures that the control owners performed to evaluate whether the amounts recognized as revenue were appropriate. (AS 2201.42 and .44)

With respect to four types of revenue the following deficiencies were identified: · The firm selected for testing controls that consisted of the issuer's reviews of financial results including comparisons of each type of revenue to prior-period revenue and for three of these types of revenue to forecasted revenue. The firm did not evaluate the review procedures that the control owners 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)

With respect to four types of revenue the following deficiencies were identified: · The firm selected for testing controls over the forecasted revenue used in the operation of the controls discussed above. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the forecasted revenue. (AS 2201.42 and .44)

With respect to other types of revenue that were recorded at certain of the issuer's business units ('other revenue types') the following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's reviews of financial results including these other revenue types. The firm did not evaluate the review procedures that the control owners 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 issuer recognized revenue from a customer contract over time based on costs incurred to date relative to total estimated costs to complete the contract. The issuer used forecasted labor hours in determining the estimated costs to complete the contract. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's reviews of the forecasted labor hours. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the total forecasted labor hours. (AS 2201.42 and .44)

The issuer offered various forms of sales incentives to customers that were recorded as deductions from revenue. The firm selected for testing a control that consisted of the issuer's review and approval of the allocated sales incentives. The firm did not evaluate the specific review procedures that the control owner performed to assess the accuracy of the calculated sales incentives. (AS 2201.42 and .44)

The firm selected for testing controls that consisted of the issuer's review of revenue cut-off and credit balance refunds and write-offs. The firm did not evaluate the review procedures that the control owners 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 component recognized revenue from a variety of sources. The following deficiencies were identified: · The firm selected for testing controls that consisted of management's review of certain financial results including the amount of revenue recognized during the period as compared to forecasted and/or budgeted amounts and investigation of variances. The firm did not evaluate the specific review procedures that the control owners performed to investigate identified variances. (AS 2201.42 and .44)

The component recognized revenue from a variety of sources. The following deficiencies were identified: · The firm selected for testing another control that consisted of management's monthly review of the status of projects to evaluate the appropriateness of the revenue recognized. 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 selected for testing controls that consisted of management's (1) review and approval of proposals and (2) monthly review of reports used to recognize revenue. The firm did not evaluate the specific review procedures that the control owners performed to evaluate the appropriateness of certain assumptions in the proposals and monthly reports used to recognize revenue. (AS 2201.42 and .44)

The firm selected for testing a control that included monthly reviews of income statement accounts including a comparison of the actual results to forecasted amounts and the investigation of variances over a specified threshold. The firm did not evaluate the specific review procedures that the control owner performed to determine whether items identified for investigation were appropriately resolved. (AS 2201.42 and .44)

The firm selected for testing a control over certain revenue that consisted of the issuer's review of an accounting analysis to ensure that revenue was appropriately recognized. 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)

For certain revenue the firm selected for testing a control that consisted of the reconciliation of data used to recognize revenue between two IT applications. The firm did not evaluate the specific review procedures that the control owner performed to investigate and resolve certain reconciling differences identified during the performance of the control. (AS 2201.42 and .44)

The issuer entered into contracts with customers and recognized revenue based on the contractual terms of each contract entered into its accounting system. The issuer also prepared credit notes for adjustments to revenue. The following deficiency was identified: · The firm selected for testing a control over revenue that consisted of management's review of a selection of customer contracts including their respective contractual terms. The firm did not sufficiently evaluate the specific review procedures that the control owner performed to review the contractual terms of the selected contracts because the firm's procedures were limited to management's review of only one term within the contracts. (AS 2201.42 and .44)

The principal auditor instructed the firm to test a control that consisted of the issuer's quarterly review of the gross margin by product for certain revenue. 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 selected for testing a control over the issuer's review of contracts for appropriate revenue recognition. The firm did not evaluate the specific review procedures that the control owners performed to assess whether the allocation of revenue to separate performance obligations was based on standalone selling prices. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the issuer's review of new and modified contracts for appropriate revenue recognition. The firm did not evaluate the specific review procedures that the control owners performed to assess the appropriateness of (1) the performance obligations identified and (2) the standalone selling price used to allocate revenue to separate performance obligations. (AS 2201.42 and .44)

The issuer used multiple IT systems to initiate process and record transactions related to revenue at certain of the issuer's locations. The following deficiencies were identified: · The firm selected for testing controls that consisted of the issuer's review and approval of changes to prices maintained in these IT systems. The firm did not evaluate the specific review procedures that the control owner performed to assess the appropriateness of certain of these price changes. (AS 2201.42 and .44)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the issuer's estimate of the relative standalone selling prices. The estimated standalone selling prices were based on the expected cost plus a margin approach which included significant assumptions related to the expected costs of satisfying each of the performance obligations. The following deficiencies were identified: · The firm selected for testing controls that included the issuer's reviews of the estimated standalone selling prices including the significant assumptions. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of these significant assumptions. (AS 2201.42 and .44)

For another type of revenue the issuer used models to estimate certain contractual adjustments. The firm selected for testing a control that consisted of the issuer's review of these models. The firm did not evaluate the specific review procedures the control owners performed to assess the reasonableness of the output of these models. (AS 2201.42 and .44)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling prices. The relative standalone selling prices were determined based in part on the issuer's categorization of its product offerings and pricing discounts it offered its customers. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's review and approval of the selling price data used to determine the standalone selling prices. The firm did not evaluate the specific review procedures that the control owners performed to evaluate exceptions identified for certain items that were selected for testing. (AS 2201.44) In connection with our review the issuer reevaluated its controls over revenue including IT controls and concluded that material weaknesses existed that had not been previously identified. The issuer subsequently reflected these material weaknesses in a revision to its report on ICFR and the firm revised and reissued its report on the effectiveness of the issuer's ICFR to include these additional material weaknesses.

The firm selected for testing two controls that consisted of the issuer's review of invoices and contracts for appropriate revenue recognition. The firm did not evaluate the specific review procedures that the control owners performed to assess whether certain revenue generated from these contracts was recorded in the appropriate period. (AS 2201.42 and .44)