Explorer

The firm selected a sample of transactions to test revenue and performed cut-off testing. The following deficiency was identified: • The firm determined that the issuer was unable to support whether or not it had satisfied its performance obligations for several revenue transactions selected for testing. As a result the firm identified adjusting entries that the issuer recorded. The firm did not perform procedures to obtain further audit evidence to address whether the adjusting journal entries were appropriate or if the firm was unable to obtain sufficient appropriate audit evidence to have a reasonable basis to conclude about whether the financial statements as a whole were free of material misstatement the firm should have expressed a qualified opinion or a disclaimer of opinion. (AS 2810.35) In connection with our review the issuer reevaluated its accounting for certain revenue and related accounts and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently corrected this misstatement in a restatement of its financial statements and the firm revised and reissued its report on the financial statements.

The firm selected a sample of transactions to test revenue and performed cut-off testing. The following deficiency was identified: • The firm did not perform sufficient procedures to evaluate whether two additional journal entries that it identified to reverse revenue which the issuer recorded were appropriate because it did not evaluate the appropriateness of the offsets to the reversed revenue. (AS 2301.08 and .13) In connection with our review the issuer reevaluated its accounting for certain revenue and related accounts and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently corrected this misstatement in a restatement of its financial statements and the firm revised and reissued its report on the financial statements.

The firm's internal inspection program had inspected this audit and reviewed the Revenue and Related Accounts area and also identified certain of the deficiencies below. The firm did not perform any test of details to address the fraud risk related to the occurrence of certain revenue. (AS 2301.08 and .13)

The firm identified a fraud risk related to overstatement and completeness of revenue. The firm did not perform sufficient tests of details in response to the fraud risk because it limited its procedures to confirming amounts billed and testing other revenue transactions as discussed above. (AS 2301.13) Unrelated and prior to our review the issuer reevaluated its accounting for revenue and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently corrected this misstatement in a restatement of its financial statements.

The issuer had multiple subsidiaries. During the year the issuer entered into a certain type of transaction through one of its subsidiaries. The following deficiency was identified: · The firm did not evaluate whether the business purpose (or lack thereof) of these transactions indicated that the transactions may have been entered into to engage in fraudulent financial reporting or conceal misappropriation of assets. (AS 2401.67)