Explorer

The firm's approach for substantively testing the valuation of a significant transaction was to test the issuer's process which included the use of projected financial information developed by the issuer using significant assumptions related to sales volume for the forecasted period. The firm did not sufficiently evaluate the reasonableness of these assumptions because it limited its procedures to inquiry of management and review of internal plans without taking into account the issuer's ability to carry out its planned course of action. (AS 2501.16 and .17)

During the year the issuer reported a significant transaction. The following deficiency was identified: • The firm did not perform procedures to test the fair value of certain aspects of this transaction. (AS 2501.07)

During the year the issuer entered into a significant transaction. In connection with this transaction the issuer terminated a previous arrangement and as a result recognized a loss. The firm did not evaluate the reasonableness of a significant assumption the issuer used to estimate the loss that it recognized. (AS 2501.16)

The firm selected for testing a control that consisted of management's review of the accounting for a significant transaction. The issuer engaged a company specialist to assist in developing an estimate related to this significant transaction. The firm did not perform procedures beyond obtaining general industry information to evaluate the reasonableness of certain significant assumptions that were developed by the issuer and used by the company specialist. Further the firm did not perform any procedures to evaluate the relevance and reliability of the general industry information. (AS 1105.04 and .06; AS 2501.16)

During the year the issuer entered into several significant transactions and engaged a specialist to determine the fair value of certain assets. The following deficiency was identified: · The firm did not perform any substantive procedures to evaluate the reasonableness of certain significant assumptions developed by the company's specialist. (AS 1105.A8b)

During the year the issuer entered into several significant transactions and engaged a specialist to determine the fair value of certain assets. The following deficiency was identified: · The firm used an auditor-employed specialist to evaluate certain other significant assumptions used by the company's specialist. The firm did not sufficiently evaluate the reasonableness of these significant assumptions because it did not identify that the auditor-employed specialist did not (1) perform any substantive procedures to evaluate the reasonableness of significant assumptions developed by the company's specialist and significant assumptions developed by the issuer (2) evaluate whether external data that the company's specialist used to develop certain significant assumptions were relevant and reliable and (3) evaluate the relevance and reliability of data it used in its procedures. (AS 1105.04 .06 .A8a and .A8b; AS 1201.C6 and .C7; AS 2501.16)

For certain significant transactions the firm did not sufficiently evaluate whether an assumption used to value these transactions represented its fair value because it did not consider certain contrary evidence. (AS 2502.26 .28 .31 and .36)