Explorer

To estimate the reserve for one portion of this asset the issuer developed certain projections. The firm's approach for substantively testing this reserve was to review and test management's process. The firm did not sufficiently evaluate the reasonableness of the reserve because the firm did not (1) obtain an understanding of the issuer's process for determining the projections and (2) perform procedures to test certain factors and assumptions used by the issuer to determine the reserve. (AS 2501.09 .10 and .11)

To estimate the reserve for one portion of this asset the issuer developed certain projections. The firm's approach for substantively testing this reserve was to review and test management's process. The firm did not evaluate the reserve for another portion of the asset. (AS 2501.07)

The firm did not identify and test any controls over the appropriateness of recognition for a portion of an income statement account. (AS 2201.39)

The firm selected for testing certain controls over the issuer's review of a significant estimate. The firm did not identify and test any controls over the accuracy and completeness of the data and reports that were used in the operation of these controls. (AS 2201.39)

The firm's approach for substantively testing this significant estimate was to test the issuer's process. The following deficiencies were identified: • The firm did not test the accuracy and completeness of certain data the issuer used to determine a component of this significant estimate. (AS 1105.10)

The firm's approach for substantively testing this significant estimate was to test the issuer's process. The following deficiencies were identified: • The firm did not test the accuracy of certain data it used to test a component of this significant estimate. (AS 1105.10)

The firm's approach for substantively testing this significant estimate was to test the issuer's process. The following deficiencies were identified: • The firm did not evaluate whether the issuer had a reasonable basis for certain significant assumptions the issuer used to determine a component of this significant estimate. (AS 2501.16)

The firm selected for testing certain controls over the occurrence of another portion of this income statement account. The firm did not perform any procedures beyond inquiry to test the design and operating effectiveness of these controls. (AS 2201.42 and .44)

The issuer held certain assets at multiple locations. The following deficiencies were identified: • The firm did not identify and test any controls over the valuation of certain assets. (AS 2201.39)

The issuer held certain assets at multiple locations. The following deficiencies were identified: • The firm selected for testing a control that consisted of management's review of the existence of a portion of these assets. 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 held certain assets at multiple locations. The following deficiencies were identified: • The firm selected for testing a control that consisted of the review of the existence of another portion of these assets. The firm did not sufficiently test this control because it did not evaluate whether the control as designed addressed the entire portion of these assets. (AS 2201.42 and .44)

The issuer held certain assets at multiple locations. The following deficiencies were identified: • The firm selected for testing a control that consisted of the automated calculation of the recorded value for a portion of these assets and tested the control by reviewing a screenshot of the system configuration subsequent to year end. The firm did not test (1) whether the control had changed since year end and (2) the automated calculation beyond obtaining a screenshot of the system configuration. (AS 2201.42 and .44)

The issuer held certain assets at multiple locations. The following deficiencies were identified: • The firm selected for testing a control that consisted of the automated calculation of the recorded value for another portion of these assets but did not perform procedures to test this control. (AS 2201.42 and .44)

The issuer held certain assets at multiple locations. The following deficiencies were identified: • The firm did not perform any substantive procedures to test the recorded values for certain portions of these assets. (AS 2301.08)

The firm selected for testing certain controls over the issuer's review of a significant estimate. 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 inspected this audit and reviewed this area but did not identify the deficiency below. The firm selected for testing a control over revenue that consisted of the issuer's review of the financial statements of certain subsidiaries. The firm did not evaluate the specific review procedures that the control owner performed to evaluate whether the amounts recognized as revenue at these subsidiaries were appropriate. (AS 2201.42 and .44)

The firm did not perform substantive procedures to test the valuation of certain investment securities held within various investment funds beyond comparing their net asset value to the trustee statements. (AS 2501.07)

During the year the issuer extended the useful lives of its intangible assets from their original lives. The issuer used a discounted cash flow analysis over the extended lives to evaluate its intangible assets for possible impairment. The firm did not perform sufficient procedures to evaluate the reasonableness of the sales projections because the firm did not perform procedures beyond inquiry to test the reasonableness of extending the useful lives. (AS 2502.26 and .28)

During the year the issuer extended the useful lives of its intangible assets from their original lives. The issuer used a discounted cash flow analysis over the extended lives to evaluate its intangible assets for possible impairment. The firm did not sufficiently evaluate the issuer's ability to achieve its forecasted sales projections in light of the substantial doubt about the issuer's ability to continue as a going concern because it limited its procedures to inquiry and comparing the forecasted sales projections to the current year results. (AS 2502.26 .28 .31 and .36)

The issuer recognized certain revenue upon shipment of its products to distributors. Certain contracts for this revenue included provisions for customer pricing rebates. The firm did not identify and evaluate the significance to the issuer's financial statements of departures from GAAP related to (1) the issuer not considering the rebates in estimating at the time revenue was recognized the amount of consideration to which it was entitled in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers and (2) the issuer's disclosures inaccurately stating that customer pricing rebates were recorded as a reduction of revenue in the same period the related sales were recorded. (AS 2810.30 and .31)

To substantively test revenue the firm selected sales transactions for testing. For these selections the firm did not evaluate whether all of the relevant revenue recognition criteria had been met. (AS 2301.08)

The firm's approach for substantively testing the issuer's reserve for excess and obsolete (E&O) inventory was to develop an independent expectation of the estimate. The firm did not sufficiently evaluate the reasonableness of the estimate because the firm's independent expectation was limited to inventory items with no changes in quantities on hand during the year and did not consider whether there were other inventory items that required an E&O reserve. Further the firm's procedures to evaluate differences it identified from its independent expectation were limited to inquiry of management. (AS 2501.09 .10 and .12)

The firm selected for testing a control that consisted of the issuer's review of newly originated loans for proper approvals proper documentation and accuracy of the upload to the loan system. 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 sample size the firm used in its substantive procedures to test loans was too small to provide sufficient appropriate audit evidence because the procedures were designed based on a level of control reliance that was not supported due to deficiencies in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiencies below. The issuer calculated the qualitative component of the allowance for loan losses (ALL) by applying basis points to each qualitative factor. The firm did not perform sufficient procedures to test the qualitative component of the ALL because the firm did not evaluate whether the issuer had a reasonable basis for the significant assumptions related to the basis points used. (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's approach for substantively testing the fair value of a significant asset was to test the issuer's process. The following deficiency was identified: · The firm did not perform any procedures to evaluate the reasonableness of certain significant assumptions developed by the issuer. (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's approach for substantively testing the fair value of a significant asset was to test the issuer's process. The following deficiency was identified: · The firm did not perform substantive procedures beyond inquiry to evaluate whether the issuer had a reasonable basis for another significant assumption developed by the issuer. (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's approach for substantively testing the fair value of a significant asset was to test the issuer's process. The following deficiency was identified: · The firm used an auditor-employed specialist to evaluate another significant assumption the issuer used. The firm did not sufficiently evaluate the reasonableness of that significant assumption because it did not identify that the auditor-employed specialist (1) limited its procedures to evaluate the reasonableness of the significant assumption to inquiry and comparison to external data and (2) did not evaluate the relevance and reliability of the external data. (AS 1105.04 and .06; AS 1201.C6 and .C7; AS 2501.16)

The firm's internal inspection program inspected this audit and reviewed these areas but did not identify the deficiencies below. The issuer used service organizations to process payroll expense and recorded this expense based on information provided by the service organizations. The firm did not perform procedures to test certain of these payroll expenses beyond comparing the amounts to the service organization reports and/or issuer-prepared documents. (AS 2301.08)

The firm's internal inspection program inspected this audit and reviewed these areas but did not identify the deficiencies below. The firm did not perform any substantive procedures to test certain other operating expenses. (AS 2301.08)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer recognized revenue from certain contracts as either single performance obligations or multiple performance obligations satisfied at a point in time. The firm's substantive procedures to test revenue consisted of selecting a sample of transactions for testing. The following deficiency was identified: • The firm did not perform any substantive procedures to evaluate the issuer's contract terms with its customers to determine whether the issuer recognized revenue in conformity with FASB ASC Topic 606 Revenues from Contracts with Customers. (AS 2301.08 and .13)

The issuer developed an estimate related to certain other of these significant assets. The firm's approach for substantively testing this estimate was to test the issuer's process. The following deficiency was identified: • The firm did not perform any procedures beyond inquiry to evaluate the appropriateness of the issuer's classification of certain significant assets. (AS 2301.08 and .11)

The issuer developed an estimate related to certain other of these significant assets. The firm's approach for substantively testing this estimate was to test the issuer's process. The following deficiency was identified: • The firm did not sufficiently evaluate whether the issuer's method used to determine an estimate related to the significant assets was in conformity with GAAP because it did not evaluate whether the method considered a certain significant assumption. (AS 2501.10)

The issuer developed an estimate related to certain other of these significant assets. The firm's approach for substantively testing this estimate was to test the issuer's process. The following deficiency was identified: • The firm did not evaluate whether the issuer had a reasonable basis for using a certain significant assumption used to develop an estimate related to the significant assets. (AS 2501.16)

The issuer developed an estimate related to certain other of these significant assets. The firm's approach for substantively testing this estimate was to test the issuer's process. The following deficiency was identified: • The firm did not test or test any controls over the accuracy and completeness of certain data used to determine the estimate. (AS 1105.10)

To identify and select journal entries for testing the firm identified fraud characteristics and obtained a list of all journal entries with these characteristics. The firm did not perform sufficient procedures to test those journal entries because it examined the underlying support for only certain of the journal entries without having an appropriate rationale for limiting its testing to those certain journal entries. (AS 2401.61)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer recognized revenue from certain contracts as either single performance obligations or multiple performance obligations satisfied at a point in time. The firm's substantive procedures to test revenue consisted of selecting a sample of transactions for testing. The following deficiency was identified: • The firm did not sufficiently evaluate the issuer's identification of performance obligations because it did not evaluate (1) the issuer's basis for concluding that the goods or services or bundles thereof represented single or multiple performance obligations including any ‘series' performance obligations; and (2) whether any performance obligations met the criteria for recognition over time. (AS 2301.08 and .13)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer recognized revenue from certain contracts as either single performance obligations or multiple performance obligations satisfied at a point in time. The firm's substantive procedures to test revenue consisted of selecting a sample of transactions for testing. The following deficiency was identified: • The firm did not perform any procedures to test whether performance obligations had been satisfied before revenue was recognized for all but four transactions selected for testing. (AS 2301.08 and .13) For two of these transactions the firm did not test or test any controls over the completeness and accuracy of issuer-produced information used in its substantive testing. (AS 1105.10)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer recognized revenue from certain contracts as either single performance obligations or multiple performance obligations satisfied at a point in time. The firm's substantive procedures to test revenue consisted of selecting a sample of transactions for testing. The following deficiency was identified: • The firm did not perform any procedures to test whether performance obligations had been satisfied before revenue was recognized for all but four transactions selected for testing. (AS 2301.08 and .13) For two of these transactions the firm did not test or test any controls over the completeness and accuracy of issuer-produced information used in its substantive testing. (AS 1105.10)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer recognized revenue from certain contracts as either single performance obligations or multiple performance obligations satisfied at a point in time. The firm's substantive procedures to test revenue consisted of selecting a sample of transactions for testing. The following deficiency was identified: • The firm's sample was too small to provide sufficient appropriate audit evidence because the firm did not take into account the relevant factors in determining its sample size including tolerable misstatement for the population the allowance for incorrect acceptance and the characteristics of the population. (AS 2315.16 .19 .23 and .23A)

The firm did not evaluate whether the issuer's accounting for certain revenue as the principal rather than as an agent was appropriate. (AS 2301.08 and .13)

The firm's approach to testing accounts receivable included sending a positive confirmation request to the issuer's largest customer. The firm sent the confirmation request to a respondent who was an employee of the issuer who also performed contract work for the customer without considering the respondent's objectivity and freedom from bias and whether the response that was received by the firm provided meaningful and appropriate evidence. (AS 2310.26 and .27)

The firm also traced one invoice due from another customer to subsequent cash receipts. The firm did not perform any procedures to test the remaining accounts receivable balance. (AS 2301.08 and .13)

During the year events or changes in circumstances existed indicating that the carrying value of the significant assets may not be recoverable. The firm did not evaluate whether the issuer performed an assessment of these assets for possible impairment. (AS 2301.08; AS 2810.03)

The firm did not perform substantive procedures beyond inquiry and obtaining and reading an issuer-prepared memorandum to evaluate whether the issuer appropriately accounted for certain aspects of a related party transaction in conformity with GAAP. (AS 2410.17)

The issuer engaged an external valuation specialist to determine the fair value of this related party transaction. The firm's approach to substantively testing the fair value of this transaction was to test the issuer's process. The firm did not evaluate the relevance and reliability of certain data from sources external to the issuer that the company's specialist used to develop certain significant assumptions. (AS 1105.A8a)

The issuer engaged an external valuation specialist to determine the fair value of this related party transaction. The firm's approach to substantively testing the fair value of this transaction was to test the issuer's process. The firm did not perform procedures beyond inquiry to evaluate the reasonableness of the significant assumptions developed by the company's specialist. (AS 1105.A8b)

The firm used positive confirmation requests to test a significant account. The firm did not maintain control of the confirmation requests and responses through direct communication with the intended recipients of the confirmation requests. (AS 2310.28)

The firm did not consider performing procedures to address the risks associated with electronic responses such as verifying the source and contents of the confirmation responses. (AS 2310.29)

The issuer made certain payments to a third-party shortly before year-end to acquire an asset that was reported on its balance sheet. The firm did not perform sufficient procedures to test the existence and presentation and disclosure of the asset because it did not evaluate whether ownership of the asset had transferred to the issuer prior to year-end and whether the asset was properly presented and disclosed in the issuer's financial statements. (AS 2301.08)