Explorer

The firm was instructed by the principal auditor to perform procedures to address certain risks of material misstatement identified by the principal auditor including a fraud risk related to management override of controls. The firm reported to the principal auditor that it responded to the identified fraud risk by performing procedures to test journal entries among other procedures. The firm did not perform procedures to select and test journal entries for certain fraud criteria identified by the firm. (AS 2401.61)

The issuer used multiple information-technology (IT) systems to initiate process and record inventory and inventory-related transactions. The firm relied on controls it selected for testing in its approach to testing inventory. In its testing of controls over inventory the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by these IT systems. As a result of the following deficiencies in the firm's testing of IT general controls (ITGCs) over certain of these IT systems the firm's testing of these automated and IT-dependent controls was not sufficient. (AS 2301.18)

The firm became aware through discussions with the issuer's audit committee and a review of whistleblower program records of two incidents involving the improper authorization of lease agreements by a manager acting on behalf of the issuer. The firm did not evaluate the effect of these possible illegal acts on the effectiveness of the issuer's internal control over financial reporting. (AS 2201.B8)

The issuer used multiple information-technology (IT) systems to initiate process and record inventory and inventory-related transactions. The firm relied on controls it selected for testing in its approach to testing inventory. In its testing of controls over inventory the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by these IT systems. ? The firm selected for testing certain controls over change management and user access but did not perform procedures to test or test any controls over the completeness of the population of items from which it made its selections for testing. (AS 1105.10)

The issuer used multiple information-technology (IT) systems to initiate process and record inventory and inventory-related transactions. The firm relied on controls it selected for testing in its approach to testing inventory. In its testing of controls over inventory the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by these IT systems. ? The firm selected for testing a control that consisted of the issuer's periodic review of user access to one of its IT systems. The firm however did not perform procedures to test the design and operating effectiveness of this control. (AS 2301.19 and .21)

The issuer used multiple information-technology (IT) systems to initiate process and record inventory and inventory-related transactions. The firm relied on controls it selected for testing in its approach to testing inventory. In its testing of controls over inventory the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by these IT systems. ? The firm selected for testing a control over the authorization and restriction of privileged access to one of its systems. The firm did not perform sufficient procedures to test this control because it limited its procedures to testing that one type of privileged access was restricted at a point in time during the year. (AS 2301.16 and .21)

The issuer used multiple information-technology (IT) systems to initiate process and record inventory and inventory-related transactions. The firm relied on controls it selected for testing in its approach to testing inventory. In its testing of controls over inventory the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by these IT systems. ? For one of its IT systems the firm identified control deficiencies related to (1) developers having inappropriate access to the production environment and (2) the lack of monitoring of user activity. The firm did not evaluate the severity of these deficiencies and the effect on its control risk assessments. (AS 2301.34)

The firm selected for testing certain controls that consisted of the issuer's review of the costs at which inventory is recorded. For these controls 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 2301.19 and .21)

The sample sizes the firm used in certain of its substantive procedures to test inventory costs were too small to provide sufficient appropriate audit evidence because these procedures were designed based on a level of control reliance that was not supported due to the deficiencies in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

For certain inventory the firm did not perform any procedures to test or as discussed above sufficiently test controls over the accuracy and completeness of an inventory aging report generated from the one of the issuer's IT systems it used to test the issuer's obsolete inventory reserve. (AS 1105.10)

The firm became aware through discussions with the issuer's audit committee and a review of whistleblower program records of two incidents involving the improper authorization of lease agreements by a manager acting on behalf of the issuer. The firm did not take sufficient action in response to these possible illegal acts because (1) it limited its procedures to inquiry and reading the issuer's whistleblower reporting summary and (2) it did not evaluate the effect on the financial statements as well as consider the implications for other aspects of the audit. (AS 2405.10 and .12)

Inventory held by the component was subject to cycle-counting procedures. The firm did not identify and test any controls that addressed whether inventory items were counted with sufficient frequency in accordance with the component's cycle-count program. (AS 2201.39)

The firm did not perform any substantive procedures or sufficiently test controls to determine that the cycle-count procedures the component used for this inventory were sufficiently reliable to produce results substantially the same as those that would have been obtained by a count of all items each year. (AS 2510.11)

Deficiencies in the firm's role testing revenue controls and performing substantive revenue procedures, including incomplete control testing and undersized samples.

Deficiencies in the firm's role testing inventory controls and performing inventory count observation procedures.

The firm did not identify and test any controls over the issuer's evaluation of whether there were any terms and conditions outside of the sales orders that created enforceable rights and obligations which could affect the recognition of revenue pursuant to the FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2201.39)

The firm used an external digital confirmation platform to confirm cash but did not perform procedures to support its reliance on this digital platform's ability to maintain control over the confirmation requests and responses for the year under audit. (AS 2310.28)

The firm did not perform sufficient procedures to evaluate whether the issuer recognized revenue in conformity with FASB ASC Topic 606 because it did not evaluate whether there were any terms and conditions outside of the sales orders that created enforceable rights and obligations which could affect the recognition of revenue. (AS 2301.08 and .13)

The firm selected for testing a control that consisted of the issuer's review of the allowance for doubtful accounts (AFDA) including the review of the AFDA methodology which is determined on a quarterly basis. The firm did not evaluate the specific review procedures that the control owner performed to evaluate the reasonableness of the rates used to determine the AFDA beyond reviewing the control owner's assessment that the rates used were in compliance with the issuer's AFDA methodology. (AS 2201.42 and .44)

The firm's approach for substantively testing the issuer's AFDA was to develop an independent expectation. The firm did not take into account (1) the requirements of an element of FASB ASC Topic 326 Financial Instruments - Credit Losses and (2) its understanding of the issuer's process so that its independent expectation considered the factors relevant to the estimate. Additionally the firm did not perform procedures to demonstrate that it had a reasonable basis for the method and assumptions it used to develop its independent estimate. (AS 2501.21 and .22)

The firm did not identify and test any controls over the issuer's identification of related parties and relationships and transactions with related parties. (AS 2201.39)

The firm did not test or test any controls over the accuracy and completeness of certain data from a report used to substantively test revenue. (AS 1105.10)

With respect to the allowance for doubtful accounts the firm was instructed by the lead auditor to perform certain substantive procedures to test the accounts receivable aging buckets of the component. The firm did not perform any procedures to test the component's accounts receivable aging buckets as instructed by the lead auditor. (AS 2301.08)

With respect to certain inventory the firm was instructed by the lead auditor to perform substantive procedures to test the valuation of the inventory including price testing at the stock keeping unit (SKU) level for which the firm was instructed to test every invoice that makes up the SKU category selected for testing. The firm did not test every invoice that made up the selected SKU category as instructed by the lead auditor. (AS 2301.08)

The firm did not test or test any controls over the accuracy and completeness of certain data used to substantively test revenue beyond obtaining evidence of payment for selected transactions. (AS 1105.10)

The firm's internal inspection program inspected this audit and reviewed these areas but did not identify the deficiencies below. The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to revenue. In its testing of controls over revenue the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT systems that depended on effective IT general controls (ITGCs). As a result of the deficiencies in the firm's testing of ITGCs the firm's testing of these automated and IT-dependent manual controls was not sufficient. (AS 2201.46)

The firm did not perform sufficient substantive procedures to test the existence of accounts receivable because for certain receivables selected for testing the firm limited its procedures to comparing the customer's name date and amount of the receivable to the corresponding tax invoice which was based on sales data provided by the component. (AS 2301.08)

The firm did not request the confirmation of accounts receivable or document how it overcame the presumption to perform confirmation procedures. (AS 2310.34 and .35)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm's observation procedures at the selected locations were not suitable because the firm did not perform any substantive procedures to (1) investigate certain variances identified between the firm's test counts and the component's inventory records; (2) compare certain quantities of inventory measured by the firm to the component's inventory records; and (3) test inventory cut-off at one location. Therefore these observations did not provide sufficient evidence of the quantity of inventory at these locations. (AS 2510.09)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm did not perform substantive procedures to test the density and volume conversion factors used to determine the inventory quantity for certain items selected for testing beyond obtaining the factors from the company's specialists. Further the firm did not perform any procedures to use the work of the company's specialists as audit evidence. (AS 1105.A1 - .A10; AS 2510.09)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The test intervening transactions between the dates of its observation procedures and year-end the firm selected a sample of transactions related to the purchase and sale of inventory which represented approximately 86% and 28% of total inflows and outflows respectively of the total inventory movement. The samples the firm used to test the inventory movement did not provide sufficient appropriate audit evidence because in planning the samples the firm did not consider the characteristics of the entire population of inventory inflows and outflows and how differences in those characteristics would affect the determination of the number of separate inflow and outflow samples. (AS 2315.16 .23 and .23A)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm did not perform sufficient substantive procedures to test the intervening transactions it selected for testing because the firm's procedures were limited to agreeing certain information related to the transactions to data provided by the component. (AS 2510.12)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm did not perform any procedures to reconcile the quantities of certain inventory items counted at one location to the quantities of those items in the inventory schedule used to roll the results of the firm's observation procedures forward to year-end. (AS 2510.12)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm did not perform any substantive procedures to test the existence of inventory held at a third-party warehouse. (AS 2510.14)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm did not perform any substantive procedures to test the cost of raw materials inventory. (AS 2301.08)

The component relied on a specialist that it employed for the measurement of the density of certain inventory and engaged an external specialist to assist in the measurement of the stock volume of certain inventory which were used to calculate the inventory quantity. To test the existence of inventory the firm observed the component's physical inventory counts at select locations and performed procedures to test the rollforward of inventory from the dates in which the inventory was physically counted to year-end using a system-generated report provided by the component. To test the valuation of inventory the firm used certain other system generated reports provided by the component. The following deficiencies were identified: · The firm did not perform any procedures to test or test any controls over the completeness and/or accuracy of certain data or reports used in its substantive testing of inventory. (AS 1105.10)

The firm's internal inspection program inspected this audit and reviewed these areas but did not identify the deficiencies below. The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to revenue. In its testing of controls over revenue the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT systems that depended on effective IT general controls (ITGCs). With respect to change management: The firm selected for testing a change management control over certain IT systems that consisted of the recording of non-emergency changes in the issuer's ticketing system and the review and approval of such changes. The firm did not perform procedures to test or test any controls over the completeness of the population of changes from which it made its selections for testing. (AS 1105.10)

The firm's internal inspection program inspected this audit and reviewed these areas but did not identify the deficiencies below. The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to revenue. In its testing of controls over revenue the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT systems that depended on effective IT general controls (ITGCs). With respect to developer access: The firm did not identify and test any controls over the ability of developers to develop and migrate changes to the production environment for certain IT systems. (AS 2201.39)

The firm's internal inspection program inspected this audit and reviewed these areas but did not identify the deficiencies below. The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to revenue. In its testing of controls over revenue the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT systems that depended on effective IT general controls (ITGCs). With respect to the firm's testing of other controls including automated and IT-dependent manual controls over the recognition of certain revenue which were affected by the audit deficiencies related to change management and developer access the following additional deficiencies were identified: · For certain controls the firm did not identify and test any controls over the accuracy and completeness of data and reports generated by various IT systems that the control owners used in the operation of the controls. (AS 2201.39)

The firm's internal inspection program inspected this audit and reviewed these areas but did not identify the deficiencies below. The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to revenue. In its testing of controls over revenue the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT systems that depended on effective IT general controls (ITGCs). With respect to the firm's testing of other controls including automated and IT-dependent manual controls over the recognition of certain revenue which were affected by the audit deficiencies related to change management and developer access the following additional deficiencies were identified: · For certain controls the firm did not perform procedures to test or test any controls over the completeness of the populations from which it made its selections for testing. (AS 1105.10)

The firm's internal inspection program inspected this audit and reviewed these areas but did not identify the deficiencies below. The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to revenue. In its testing of controls over revenue the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT systems that depended on effective IT general controls (ITGCs). With respect to the firm's testing of other controls including automated and IT-dependent manual controls over the recognition of certain revenue which were affected by the audit deficiencies related to change management and developer access the following additional deficiencies were identified: · For certain controls the firm did not test controls over the completeness of data and reports generated by various IT systems that were used in the operation of the controls beyond comparing information from these reports to data from the same reports and/or reviewing emails retained by the control owners. (AS 2201.42 and .44)

The firm's internal inspection program inspected this audit and reviewed these areas but did not identify the deficiencies below. The firm used system-generated data to substantively test certain revenue but did not test or sufficiently test controls over the accuracy and completeness of this data. (AS 1105.10)

The firm's internal inspection program inspected this audit and reviewed these areas but did not identify the deficiencies below. The firm's approach for substantively testing the valuation of long-lived assets was to test the issuer's process. The firm did not perform procedures beyond inquiry of management to evaluate the reasonableness of the significant assumptions used by the issuer to evaluate long-lived assets for impairment. (AS 2501.16)

The firm's internal inspection program inspected this audit and reviewed these areas but did not identify the deficiencies below. The firm identified manual journal entries that met certain fraud criteria. The firm did not select any of the manual journal entries and other adjustments for testing that met the identified fraud criteria. (AS 2401.61)

The firm's internal inspection program had inspected this audit and reviewed Long-Lived Assets but did not identify the deficiency below. The issuer engaged external specialists to review and compile technical reports on its mineral reserves and resources (“reserve estimates”) and develop a life-of-mine (LOM) plan for each mining site which were then used in the (1) calculation of depreciation and (2) impairment analysis of long-lived assets. The company's specialists used financial and non-financial data and assumptions prepared by the issuer and/or obtained from external sources to develop the reserve estimates and LOM plans. The firm selected for testing certain controls over long-lived assets that consisted of the issuer's reviews of (1) fixed asset register reconciliations (2) asset status reports and (3) the LOM plans and technical reports developed/compiled by the company's specialists. 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 2201.44)

The firm's internal inspection program had inspected this audit and reviewed Long-Lived Assets but did not identify the deficiency below. The issuer engaged external specialists to review and compile technical reports on its mineral reserves and resources (“reserve estimates”) and develop a life-of-mine (LOM) plan for each mining site which were then used in the (1) calculation of depreciation and (2) impairment analysis of long-lived assets. The company's specialists used financial and non-financial data and assumptions prepared by the issuer and/or obtained from external sources to develop the reserve estimates and LOM plans. The firm's approach for substantively testing long-lived assets associated with the issuer's reserve estimates and LOM plans as developed by the company's specialists was to test the issuer's process. The following deficiency was identified: • The firm did not (1) test the accuracy and completeness of non-financial data prepared by the issuer and (2) evaluate the relevance and reliability of external non-financial data all of which were used by the company's specialist to develop the LOM plan assumptions which were used to compute depreciation expense. (AS 1105.A8a)

The firm's internal inspection program had inspected this audit and reviewed Long-Lived Assets but did not identify the deficiency below. The issuer engaged external specialists to review and compile technical reports on its mineral reserves and resources (“reserve estimates”) and develop a life-of-mine (LOM) plan for each mining site which were then used in the (1) calculation of depreciation and (2) impairment analysis of long-lived assets. The company's specialists used financial and non-financial data and assumptions prepared by the issuer and/or obtained from external sources to develop the reserve estimates and LOM plans. The firm's approach for substantively testing long-lived assets associated with the issuer's reserve estimates and LOM plans as developed by the company's specialists was to test the issuer's process. The following deficiency was identified: • The firm did not evaluate the reasonableness of the LOM plans which were considered significant assumptions by the firm developed by the company's specialists and used to compute depreciation expense. (AS 1105.A8b)

The firm's internal inspection program had inspected this audit and reviewed Long-Lived Assets but did not identify the deficiency below. The issuer engaged external specialists to review and compile technical reports on its mineral reserves and resources (“reserve estimates”) and develop a life-of-mine (LOM) plan for each mining site which were then used in the (1) calculation of depreciation and (2) impairment analysis of long-lived assets. The company's specialists used financial and non-financial data and assumptions prepared by the issuer and/or obtained from external sources to develop the reserve estimates and LOM plans. The firm's approach for substantively testing long-lived assets associated with the issuer's reserve estimates and LOM plans as developed by the company's specialists was to test the issuer's process. The following deficiency was identified: • The firm did not evaluate the reasonableness of another significant non-financial assumption developed by the issuer and used by the company's specialists to develop the reserve estimates beyond evaluating its consistency with the issuer's budget. (AS 2501.16)

The firm's internal inspection program had inspected this audit and reviewed Long-Lived Assets but did not identify the deficiency below. The issuer engaged external specialists to review and compile technical reports on its mineral reserves and resources (“reserve estimates”) and develop a life-of-mine (LOM) plan for each mining site which were then used in the (1) calculation of depreciation and (2) impairment analysis of long-lived assets. The company's specialists used financial and non-financial data and assumptions prepared by the issuer and/or obtained from external sources to develop the reserve estimates and LOM plans. The firm's approach for substantively testing long-lived assets associated with the issuer's reserve estimates and LOM plans as developed by the company's specialists was to test the issuer's process. The following deficiency was identified: • The firm did not evaluate whether the methods used by the company's specialists to develop the reserve estimates and LOM plans were appropriate under the circumstances taking into account the requirements of the applicable financial reporting framework. (AS 1105.A8c)

The firm's internal inspection program had inspected this audit and reviewed Long-Lived Assets but did not identify the deficiency below. The issuer engaged external specialists to review and compile technical reports on its mineral reserves and resources (“reserve estimates”) and develop a life-of-mine (LOM) plan for each mining site which were then used in the (1) calculation of depreciation and (2) impairment analysis of long-lived assets. The company's specialists used financial and non-financial data and assumptions prepared by the issuer and/or obtained from external sources to develop the reserve estimates and LOM plans. The firm's approach for substantively testing long-lived assets associated with the issuer's reserve estimates and LOM plans as developed by the company's specialists was to test the issuer's process. The following deficiency was identified: • The firm did not perform procedures to test the accuracy of the dates in which long-lived assets were placed in service and the locations of those assets which were inputs used to compute depreciation expense. (AS 2301.08)