Explorer

The firm selected for testing a control that consisted of the issuer's review and approval of the reserve for excess and obsolete inventory. The firm did not identify and test any controls over the accuracy and completeness of the reports that the issuer used in the operation of this control. (AS 2201.39)

The firm did not identify and test any controls over the initial recording of certain sales in the issuer's sales systems. (AS 2201.39)

The firm sent positive confirmation requests to the issuer's customers for a sample of deposit liabilities. For the items in its sample for which the requested confirmations were not returned the firm did not perform alternative procedures that provided sufficient appropriate audit evidence that the recorded amounts of the deposit liabilities were accurate as of the confirmation date. (AS 2310.31)

The firm selected for testing controls that included the issuer's reviews of the assumptions used to estimate the ACL. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of these assumptions. (AS 2201.42 and .44)

The firm's approach for substantively testing the reasonableness of certain assumptions the issuer used to estimate the ACL was to review and test the issuer's process. The firm's procedures were limited to comparing these assumptions to those used in the prior year and inquiring of management about significant variances. Further the firm's approach for testing certain other assumptions the issuer used to estimate the ACL was to develop an independent expectation of the assumptions. The firm did not have a reasonable basis for its expectation because it did not evaluate the relevance of the industry information it used in developing its expectation. (AS 1105.04 and .06; 2501.16)

The firm selected for testing a control that included the issuer's review of the fair values of investments. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of these fair values. (AS 2201.42 and .44)

The firm selected for testing a control over the issuer's review of certain 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)

For certain revenue the firm selected a sample of revenue transactions for testing. The firm did not perform any substantive procedures to evaluate whether the issuer's allocation of revenue to separate performance obligations was based on standalone selling prices. (AS 2301.08)

The firm's substantive procedures to test certain of this revenue consisted of substantive analytical procedures. The firm used certain sales data to develop its expectations but did not test the accuracy of these data. (AS 2305.16)

The firm selected for testing a control that consisted of the issuer's reviews of its assessments of long-lived assets for possible impairment. For the first business unit the firm did not test the operating effectiveness of this control. (AS 2201.44)

The firm selected for testing a control that consisted of the issuer's reviews of its assessments of long-lived assets for possible impairment. For the second business unit the firm did not identify and test any controls over the accuracy and completeness of historical sales data used in the operation of this control. (AS 2201.39)

For the first business unit the firm did not sufficiently test the issuer's assessment of long-lived assets for possible impairment because the firm's procedures were limited to reading the consolidated operating results for this business unit. (AS 2501.07)

For the second business unit the firm used historical sales data in its evaluation of the issuer's assessment of long-lived assets for possible impairment. The firm did not perform any substantive procedures to test or identify and test controls over the accuracy of these data. (AS 1105.10)

The firm selected for testing controls that included the issuer's reviews of the assigned loan risk ratings. The loan risk rating was an important input in estimating the ALL. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the assigned risk ratings. (AS 2201.42 and .44)

For loans that were collectively evaluated for impairment the issuer determined the qualitative reserve component of the ALL using certain qualitative factors. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's reviews of the ALL including an assessment of the qualitative factors for reasonableness. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the qualitative factors. (AS 2201.42 and .44)

For loans that were collectively evaluated for impairment the issuer determined the qualitative reserve component of the ALL using certain qualitative factors. The following deficiencies were identified: · The firm's approach for substantively testing the ALL was to review and test the issuer's process. The firm did not sufficiently evaluate the reasonableness of the qualitative factors the issuer used to determine the qualitative reserve component of the ALL because the firm's procedures were limited to (1) reading the issuer's ALL memorandum and (2) comparing the qualitative factors the issuer used to those used in prior periods. (AS 2501.16)

The issuer used an information-technology (IT) system to process and record transactions related to revenue and inventory. The firm selected for testing controls over the issuer's granting and monitoring of user access to this system but did not evaluate the specific review procedures that the control owners performed to determine whether to grant access to users or whether access that had been previously approved continued to be appropriate. (AS 2201.42 and .44)

The issuer recorded an estimated liability for certain known and expected losses. The firm's approach for substantively testing this liability was to develop an independent expectation. The firm developed its expectation primarily based on historical losses that included (1) various loss information produced from certain of the issuer's IT systems and (2) a recorded accrual for certain known losses. The following deficiencies were identified: · The firm did not sufficiently test the accuracy of this information because it did not subject certain types of losses to testing. (AS 1105.10)

The issuer recorded an estimated liability for certain known and expected losses. The firm's approach for substantively testing this liability was to develop an independent expectation. The firm developed its expectation primarily based on historical losses that included (1) various loss information produced from certain of the issuer's IT systems and (2) a recorded accrual for certain known losses. The following deficiencies were identified: · The firm did not perform any procedures to test the reliability of the recorded accrual used in its expectation. (AS 1105.04 and .06)

The issuer's process related to revenue was highly automated with transactions being initiated processed and recorded by numerous information-technology (IT) systems. The issuer identified a material weakness related to ineffective IT general controls over certain IT systems. For the sample of revenue transactions that the firm selected for testing the firm did not perform any procedures to test whether certain information that the issuer used to record revenue was appropriate beyond comparing it to information that was generated by and maintained in certain of the issuer's systems that were affected by the material weakness. (AS 2301.08)The issuer's process related to revenue was highly automated with transactions being initiated processed and recorded by numerous information-technology (IT) systems. The issuer identified a material weakness related to ineffective IT general controls over certain IT systems. For the sample of revenue transactions that the firm selected for testing the firm did not perform any procedures to test whether certain information that the issuer used to record revenue was appropriate beyond comparing it to information that was generated by and maintained in certain of the issuer's systems that were affected by the material weakness. (AS 2301.08)

For three types of revenue the firm used certain system-generated information in its substantive testing of revenue but did not perform any procedures to test or test any controls over the accuracy and completeness of this information. (AS 1105.10)

For two other types of revenue the issuer recorded revenue based on information provided by an external service provider. The firm used this information in its substantive testing of this revenue but did not perform any procedures to test the accuracy and completeness of this information. (AS 2301.08)

The firm selected for testing certain automated and IT-dependent manual controls over revenue and inventory. The firm's approach to testing the accuracy and completeness of the data used in these controls depended on effective IT general controls including controls over user access. As a result of the deficiency in the firm's testing of the controls the firm's testing of these automated and IT-dependent manual controls was not sufficient. (AS 2201.46)

The firm selected for testing certain automated and IT-dependent manual controls over revenue and inventory. The firm's approach to testing the accuracy and completeness of the data used in these controls depended on effective IT general controls including controls over user access. As a result of the deficiency in the firm's testing of the controls the firm's testing of the automated controls was not sufficient because the firm did not test the configuration or programming of these controls or perform other procedures that would have provided sufficient appropriate audit evidence that these controls were designed and operating effectively. (AS 2201.42 and .44)

For certain automated controls over revenue the firm tested a sample of one transaction for each control in the issuer's IT testing environment rather than in its production environment. The firm's testing of certain of these controls was not sufficient because the firm did not perform any procedures to determine whether the testing environment was consistent with the production environment. (AS 2201.44)For certain automated controls over revenue the firm tested a sample of one transaction for each control in the issuer's IT testing environment rather than in its production environment. The firm's testing of certain of these controls was not sufficient because the firm did not perform any procedures to determine whether the testing environment was consistent with the production environment. (AS 2201.44)

For two business units the issuer held certain inventory at locations owned by external parties. The firm performed confirmation procedures to test the existence of this inventory but did not maintain control over the confirmation requests because the issuer sent the requests. (AS 2310.28)

For certain inventory at another business unit the firm did not identify and test any controls over the issuer's process to record costs related to this inventory including the calculation of variances between standard and actual costs. (AS 2201.39)

The firm excluded from the scope of its financial statement and ICFR audits cash related to certain business units but did not evaluate certain factors that were relevant to the assessment of the risks of material misstatement associated with this cash including the materiality of the recorded cash balances and the location of certain of these business units. (AS 2101.11 and .12; AS 2201.B10)

The issuer recorded an estimated liability for certain known and expected losses. The firm's approach for substantively testing this liability was to develop an independent expectation. The firm developed its expectation primarily based on historical losses that included (1) various loss information produced from certain of the issuer's IT systems and (2) a recorded accrual for certain known losses. The following deficiencies were identified: · The firm did not perform any procedures to determine whether it had a reasonable basis for using historical losses to estimate losses for the current year. (AS 2501.22)

The issuer recorded an estimated liability for certain known and expected losses. The firm's approach for substantively testing this liability was to develop an independent expectation. The firm developed its expectation primarily based on historical losses that included (1) various loss information produced from certain of the issuer's IT systems and (2) a recorded accrual for certain known losses. The following deficiencies were identified: · The firm did not perform any substantive procedures to test or test any controls over the completeness of certain of the loss information used in its expectation. (AS 1105.10)

For certain business units the firm identified a fraud risk but did not perform any tests of details to address this fraud risk. (AS 2301.13)

For loans that were collectively evaluated for impairment the issuer estimated the qualitative reserve component of the allowance for loan losses (ALL) using qualitative factors. The firm's approach for substantively testing the ALL was to test the issuer's process. The firm did not evaluate whether the issuer had a reasonable basis for a significant assumption the issuer used to develop certain of these qualitative factors. (AS 2501.16)

For loans that were collectively evaluated for impairment the issuer estimated the qualitative reserve component of the allowance for loan losses (ALL) using qualitative factors. The firm's approach for substantively testing the ALL was to test the issuer's process. The issuer used information from a service organization to estimate this component of the ALL. The firm did not perform procedures to test the completeness of certain of this information. (AS 2301.08)

The firm selected for testing a control that consisted of the issuer's review of new or amended customer contracts for appropriate revenue recognition. The firm did not evaluate the specific review procedures that the control owner performed to identify and evaluate all relevant terms and conditions. (AS 2201.42 and .44)

The sample sizes the firm used in certain of its substantive procedures to test revenue 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 contracts the issuer recognized revenue over time based on costs incurred to date relative to total estimated costs to complete. This revenue included an estimate of variable consideration in the transaction price. The firm selected for testing controls that consisted of the issuer's review of revenue recognition for these contracts. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the significant assumptions used to estimate the total costs to complete the contracts and the variable consideration included in the transaction prices. (AS 2201.42 and .44)

For certain of these business units and another business unit the firm did not perform any substantive procedures to test the completeness of revenue. (AS 2301.08)

The firm used data produced by the issuer in its substantive procedures to test the reserve for excess and obsolete inventory. The firm did not perform any procedures to test or test any controls over the accuracy and completeness of certain of these data. (AS 1105.10)

For one business unit the firm selected for testing a control that included the issuer's reviews of the accuracy and completeness of reports that were used in the operation of the issuer's controls over revenue and inventory. The firm did not test the aspects of this control that addressed the accuracy and/or completeness of certain of these reports. (AS 2201.42 and .44)

The firm subjected certain other of the issuer's business units to less extensive audit procedures. With respect to revenue and/or inventory for these business units in determining the extent to which audit procedures should be performed the firm did not evaluate (1) the materiality of these business units (2) the nature of the recorded balances and/or (3) whether the risks of material misstatement that the firm identified for the business units subject to more extensive audit procedures also applied to these business units. (AS 2101.11 and .12; AS 2201.B10)

The issuer recorded certain revenue net of allowances for contractual adjustments. The firm's procedures to test the estimated portion of these contractual adjustments consisted of (1) developing an independent expectation (2) testing the issuer's process and (3) evaluating transactions occurring after the measurement date. The following deficiencies were identified: · When developing its independent expectation the firm did not perform procedures beyond inquiry to demonstrate it had a reasonable basis for a certain assumption it independently derived. (AS 2501.22)

The issuer recorded certain revenue net of allowances for contractual adjustments. The firm's procedures to test the estimated portion of these contractual adjustments consisted of (1) developing an independent expectation (2) testing the issuer's process and (3) evaluating transactions occurring after the measurement date. The following deficiencies were identified: · When testing the issuer's process and evaluating transactions occurring after the measurement date the firm used certain issuer-produced reports but did not perform any procedures to test or test any controls over the accuracy and/or completeness of these reports. (AS 1105.10)

The firm's substantive procedures to test the unit cost of inventory included selecting a sample of inventory items for testing. For certain items in its sample the firm did not perform procedures to test the cost of the raw materials included in the selected items. (AS 2301.08)

The firm used certain data in its substantive testing of the reserve for excess and obsolete inventory but did not perform any procedures to test or test any controls over the accuracy and completeness of these data. (AS 1105.10)

The firm selected for testing a control that consisted of the issuer's review of its earnout liability which is a provision for contingent payments. The firm did not evaluate the specific review procedures the control owners performed to assess the reasonableness of the method data and assumptions used in the valuation of the earnout liability. (AS 2201.42 and .44) Unrelated to our review the issuer reevaluated its controls over its earnout liability and concluded that a material weakness existed that had not been previously identified. The issuer subsequently reflected this material weakness in a revision to its report on ICFR and the firm revised its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report.

The firm did not identify and evaluate the issuer's omission of a required disclosure under FASB ASC Topic 210 Balance Sheet related to major classes of inventory. (AS 2810.30 and .31)

The issuer calculated a reserve for excess and obsolete inventory by applying established percentages to each inventory aging category. The following deficiencies were identified: · The firm selected for testing a control over the issuer's review of the reserve for excess and obsolete inventory. The firm did not identify and test any controls over the accuracy of certain data used in the operation of this control. (AS 2201.39)

The issuer calculated a reserve for excess and obsolete inventory by applying established percentages to each inventory aging category. The following deficiencies were identified: · The firm used these data in its substantive procedures but did not perform any procedures to test or test any controls over the accuracy of these data. (AS 1105.10)

The firm selected for testing a control that included the issuer's review of journal entries related to inventory. The firm did not identify and test any controls over the accuracy and completeness of certain information used in the operation of this control. (AS 2201.39)

The firm did not perform any substantive procedures to test certain adjustments the issuer made to its inventory. (AS 2301.08)