Explorer

The firm did not identify and test any controls related to the issuer's evaluation of long-lived assets for possible impairment. (AS 2201.39)

The issuer recognized certain revenue based on customer usage data which was produced by one of the issuer's information technology (IT) systems. The firm did not perform procedures to test these data beyond comparing these data to information derived from this IT system. (AS 2301.08 and .13)

To identify and select journal entries for testing the firm identified fraud characteristics. For certain of these fraud characteristics the firm did not perform any procedures to identify journal entries that had these characteristics. (AS 2401.61)

The issuer recognized revenue from certain contracts over time using an input method based on the labor hours incurred or number of users. The firm did not perform substantive procedures to test whether the issuer satisfied its performance obligations before recognizing this revenue beyond comparing the number of users and labor hours incurred to issuer-produced reports. (AS 2301.08 and .13)

During the year the issuer acquired a business. The firm did not identify and evaluate the issuer's omission of certain required disclosures under FASB ASC Topic 805 Business Combinations related to the amounts of revenue and earnings of the acquired business since the acquisition date. (AS 2810.30 and .31) In connection with our review the issuer reevaluated its disclosures related to this business combination and determined that certain disclosures were omitted. The issuer did not file an amended Form 10-K or Form 8-K indicating that its previously issued financial statements should not be relied on. Instead the issuer corrected these omissions in a subsequent filing.

The firm's approach for substantively testing the fair value of the earnout liability was to test the issuer's process. The firm recalculated the issuer's estimate using a software audit tool. The firm did not perform sufficient substantive procedures to evaluate the method used by the issuer because it did not test the functionality of this tool. (AS 2501.10)

The firm did not test or sufficiently test controls over the accuracy of certain data that the issuer used to calculate the earnout liability. (AS 1105.10)

The firm did not identify and test any controls over segment reporting. (AS 2201.39) Unrelated to our review the issuer reevaluated its controls over segment reporting 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 perform substantive procedures to evaluate whether the issuer's determination of its reportable segments was in conformity with FASB ASC Topic 280 Segment Reporting beyond reading an issuer-prepared memorandum. (AS 2301.08)

The firm selected for testing a control that consisted of the issuer's review of manual journal entries. The firm did not identify and test any controls over the completeness of a system-generated report used in the operation of this control. (AS 2201.39) Unrelated to our review the issuer reevaluated its controls over journal entries 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 issuer recognized revenue from certain contracts over time by estimating its progress toward completion. The firm did not perform procedures to test this revenue beyond inspecting the contract and inquiring of project managers for a sample of contracts. (AS 2501.07)

The firm did not identify and evaluate the issuer's omission of certain required disclosures under FASB ASC Topic 606 Revenue from Contracts with Customers related to the method used to recognize revenue for one type of revenue. (AS 2810.30 and .31)

The firm did not perform any procedures to test the existence of certain inventory. (AS 2301.08)

To test the pricing of inventory the firm selected items for testing that exceeded a monetary threshold. The firm did not perform any procedures to test the remaining inventory population. (AS 1105.27; AS 2301.08)

The firm did not evaluate whether inventory was recorded at the lower of cost or market. (AS 2501.07)

The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to long-lived assets and revenue including two instances of its enterprise resource planning (“ERP”) system. In its testing of controls over long-lived assets and revenue the firm tested various automated controls over long-lived assets and IT-dependent manual controls over revenue that used data and reports generated or maintained by certain of these IT systems. As a result of the deficiencies in the firm's testing of IT general controls (ITGCs) the firm's testing of these automated and IT-dependent manual controls was not sufficient. (AS 2201.46)

The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to long-lived assets and revenue including two instances of its enterprise resource planning (“ERP”) system. In its testing of controls over long-lived assets and revenue the firm tested various automated controls over long-lived assets and IT-dependent manual controls over revenue that used data and reports generated or maintained by certain of these IT systems. • With respect to change management the firm selected for testing a control that consisted of the issuer's testing and approval of application changes before their migration into the production environment. The firm did not test the design and operating effectiveness of this control over one of the instances of the issuer's ERP system. (AS 2201.42 and .44)

The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to long-lived assets and revenue including two instances of its enterprise resource planning (“ERP”) system. In its testing of controls over long-lived assets and revenue the firm tested various automated controls over long-lived assets and IT-dependent manual controls over revenue that used data and reports generated or maintained by certain of these IT systems. • With respect to logical access the firm selected for testing controls that consisted of password configurations and the periodic review of user access. The firm did not test the design and operating effectiveness of these controls over one of the instances of the issuer's ERP system. (AS 2201.42 and .44)

For long-lived assets which were affected by the audit deficiency discussed above related to change management the following additional deficiency was identified: The firm selected for testing certain automated controls over the purchase of long-lived assets that consisted of the (1) matching of invoices approved purchase orders and receiving/inspection reports related to acquired long-lived assets (2) recording of liabilities through unbilled payables for all goods and services received through the system and (3) approval of purchase orders in accordance with an approved authorization matrix. The firm did not test the design and operating effectiveness of these controls over one of the instances of the issuer's ERP system. (AS 2201.42 and .44)

For revenue which was affected by the audit deficiencies discussed above related to change management and logical access the following additional deficiency was identified: The firm's approach for testing revenue included performing tests of details for a sample of revenue transactions. The firm did not perform sufficient procedures to verify that each individual revenue transaction had an opportunity to be selected for testing because it did not establish a basis to support the sampling interval used to select transactions for testing and as a result did not select a sample that could be expected to be representative of the population. (AS 2315.24)

The firm selected for testing certain controls over revenue that consisted of (1) the issuer's verification of certain information used to recognize revenue (2) customer approval of draft invoices (3) management's review and approval of revenue accruals and (4) management's approval of invoice adjustments. The firm did not identify and test any controls over the accuracy and completeness of certain information used in the operation of these controls. (AS 2201.39)

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 deficiency in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm used certain information in its substantive testing of revenue but did not test or (as discussed above) test controls over the accuracy and completeness of this information. (AS 1105.10)

The firm used certain information in its testing of revenue that was obtained by the issuer from its customers but it did not perform any procedures to evaluate the reliability of this information. (AS 1105.04 and .06)

The firm did not perform any procedures to test or test any controls over the accuracy and completeness of certain data it used in substantively testing revenue. (AS 1105.10)

The issuer held equity-method investments with various investees. During the year the majority shareholder of one of the investees created a new entity in which the issuer also acquired a percentage of ownership. The issuer prepared a qualitative assessment of impairment of the investee and the related new entity. As part of the qualitative assessment the issuer engaged a valuation specialist to calculate the values of the investment and related new entity. The following deficiencies were identified: · The firm did not evaluate how the issuer considered contrary evidence included in the firm's work papers in reaching its conclusion in the qualitative assessment. (AS 2301.08; AS 2810.03)

The issuer held equity-method investments with various investees. During the year the majority shareholder of one of the investees created a new entity in which the issuer also acquired a percentage of ownership. The issuer prepared a qualitative assessment of impairment of the investee and the related new entity. As part of the qualitative assessment the issuer engaged a valuation specialist to calculate the values of the investment and related new entity. The following deficiencies were identified: · The firm did not evaluate the reliability of information from an external source that the issuer used in the qualitative assessment. (AS 1105.04 and .06)

The issuer held equity-method investments with various investees. During the year the majority shareholder of one of the investees created a new entity in which the issuer also acquired a percentage of ownership. The issuer prepared a qualitative assessment of impairment of the investee and the related new entity. As part of the qualitative assessment the issuer engaged a valuation specialist to calculate the values of the investment and related new entity. The following deficiencies were identified: · The firm did not perform procedures beyond obtaining and reading the company's specialist report to test the valuation of the investment and related new entity. Further the firm did not perform procedures with respect to its use of the work of the company's specialist as audit evidence. (AS 1105.A1 - .A10; AS 2501.07)

The issuer held equity-method investments with various investees. During the year the majority shareholder of one of the investees created a new entity in which the issuer also acquired a percentage of ownership. The following deficiency was identified related to the firm's testing of the investment and the related new entity: · The issuer reported the valuation of the investee and new entity based on investee financial results including unaudited financial statements. The firm did not evaluate whether the differences between the issuer's carrying amount of its investment in the investee and new entity and the issuer's underlying equity in the net assets of the investee and the new entity were in conformity with FASB ASC Topic 323 Investments-Equity Method and Joint Ventures. (AS 1105.B4)

The issuer held equity-method investments with various investees. During the year the majority shareholder of one of the investees created a new entity in which the issuer also acquired a percentage of ownership. The following deficiency was identified related to the firm's testing of the investment and the related new entity: · The firm did not identify and evaluate departures from GAAP related to the issuer's omission of disclosures required by FASB ASC Topic 323 and FASB ASC Topic 850 Related Party Disclosures. (AS 2410.17; AS 2810.30 and .31)

The issuer held equity-method investments with various investees. During the year the majority shareholder of one of the investees created a new entity in which the issuer also acquired a percentage of ownership. The following deficiency was identified related to the firm's testing of the investment and the related new entity: · The firm did not evaluate the business purpose (or lack thereof) of the transaction to create the new entity including whether it may have been entered into to engage in fraudulent financial reporting or conceal misappropriation of assets given certain facts regarding the transaction. (AS 2401.67)

The firm did not perform procedures to test or in the alternative test any controls over the accuracy and completeness of certain issuer-produced reports that it used to substantively test certain revenue. (AS 1105.10)

The firm selected for testing a control that consisted of a review of quarterly adjustments to revenue for two products. The firm did not test the design and operating effectiveness of certain aspects of this review control that addressed one of the products. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of a review of quarterly adjustments to revenue for two products. The firm did not identify and test any controls over the accuracy and completeness of certain data and reports provided by an external party that the control owner used in the performance of this control over the other product. (AS 2201.39)

The firm used the above data and reports to substantively test revenue from one product and did not test or (as discussed above) identify and test controls over the accuracy and completeness of these data and reports as discussed above. (AS 1105.10)

The firm did not perform procedures to test the fair value of certain Level 2 investments beyond comparing the fair value to the pricing source used by the issuer. (AS 2502.26 and .28)

The firm selected for testing a control that consisted of management's review of the recognition of certain revenue. The firm did not evaluate the review procedures that the control owner 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 selected for testing a control that consisted of management's review of the recognition of certain revenue. The firm did not identify and test any controls over the accuracy and completeness of a system-generated report that control owners used in the operation of this control and certain other controls that were selected for testing related to revenue. (AS 2201.39)

The firm used a system-generated report to substantively test certain revenue but did not test or (as discussed above) test controls over the accuracy and completeness of this report. (AS 1105.10)

The firm did not perform any substantive procedures to address an identified fraud risk related to revenue. (AS 2301.13)

The issuer entered into certain revenue arrangements during the year. The firm did not perform procedures beyond comparisons to issuer-produced reports to test this revenue including testing the valuation of certain aspects of revenue. (AS 2301.08 and .11; AS 2501.07)

The firm did not perform procedures to evaluate the issuer's conclusion that there were no indicators of potential impairment for intangible assets even though the firm was aware such conditions existed. (AS 2301.08; AS 2810.03)

The firm did not identify and select journal entries and other adjustments for testing to address the potential for material misstatement due to fraud. (AS 2401.58)

The issuer entered into certain revenue arrangements during the year. The firm did not evaluate the business purpose (or lack thereof) of these arrangements that appeared unusual due to their timing size or nature including whether they may have been entered into to engage in fraudulent financial reporting or conceal misappropriation of assets given certain facts regarding the arrangements. (AS 2401.67)

The firm did not perform any procedures to test the statement of cash flows. (AS 2301.08)

The firm did not identify and select journal entries and other adjustments for testing to address the potential for material misstatement due to fraud. (AS 2401.58)

The firm did not perform procedures to test revenue beyond tracing a sample of revenue transactions to issuer-prepared invoices. (AS 2301.08 and .11)

The firm did not perform procedures to test the existence of inventory beyond comparing inventory counts from the issuer's inventory records to records from the issuer's warehouses. (AS 2510.09)

The firm did not perform procedures to test the inventory reserves beyond obtaining and reading a listing of obsolete items and the approval for the write off of certain inventory. (AS 2501.07)

The firm did not identify and select journal entries and other adjustments for testing to address the potential for material misstatement due to fraud. (AS 2401.58)