Explorer

The firm selected for testing certain automated application controls related to inventory. The firm's testing of these controls was not sufficient because the procedures performed were substantive in nature and did not directly test the controls. (AS 2201.42 .44 and .B9)

The firm observed for a sample of locations physical inventory counts performed as of various interim dates. The firm did not perform sufficient procedures to extend its audit conclusions on the existence of inventory for the periods between its interim testing and year end because the firm limited its procedures to agreeing inventory movements between the interim dates and year end to system-generated reports. (AS 2301.45)

The issuer used multiple information technology (IT) applications to initiate process and record transactions related to revenue and related accounts and inventory. The firm selected for testing certain automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these applications. The accuracy and completeness of these data and reports depended on effective IT general controls (ITGCs). - The firm did not sufficiently test change management controls because the firm did not consider all program changes in making its selections for testing. (AS 2201.42 and .44)

The issuer used multiple information technology (IT) applications to initiate process and record transactions related to revenue and related accounts and inventory. The firm selected for testing certain automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these applications. The accuracy and completeness of these data and reports depended on effective IT general controls (ITGCs). - The firm did not sufficiently test privileged access controls because the firm did not (1) consider all privileged access users in making its selections for testing and (2) test the procedures that control owners performed to evaluate the appropriateness of access. (AS 2201.42 and .44)

The issuer used multiple information technology (IT) applications to initiate process and record transactions related to revenue and related accounts and inventory. The firm selected for testing certain automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these applications. The accuracy and completeness of these data and reports depended on effective IT general controls (ITGCs). - The firm did not sufficiently test the periodic user account review control because the firm did not sufficiently evaluate whether the control as designed could effectively prevent or detect a material misstatement because the firm did not consider whether every user was assigned to an approver or the appropriateness of permissions granted to roles. (AS 2201.42 and .44)

The issuer used multiple information technology (IT) applications to initiate process and record transactions related to revenue and related accounts and inventory. The firm selected for testing certain automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these applications. The accuracy and completeness of these data and reports depended on effective IT general controls (ITGCs). - The engagement team did not identify and test any controls over the accuracy and completeness of user access lists used in the operation of the control including whether all users were included and all access roles for each user were listed for review. (AS 2201.39)

With respect to Revenue and Related Accounts the firm selected for testing certain automated application controls related to revenue. The firm's testing of these controls was not sufficient because the procedures performed were substantive in nature and did not directly test the controls. (AS 2201.42 .44 and .B9)

With respect to Revenue and Related Accounts the firm selected for testing two controls that consisted of reviews of contracts and analyses for appropriate accounting treatment under FASB ASC Topic 606 Revenue from Contracts with Customers. The firm did not evaluate the specific review procedures performed by the control owners to ensure appropriate evaluation of revenue recognition criteria. (AS 2201.42 and .44)

With respect to Revenue and Related Accounts the firm selected for testing two controls that consisted of reviews of contracts and analyses for appropriate accounting treatment under FASB ASC Topic 606 Revenue from Contracts with Customers. The engagement team did not identify and test any controls over the completeness of the population of new and amended contracts used in the operation of one of the controls. (AS 2201.39)

With respect to Revenue and Related Accounts to test certain revenue the firm selected sales transactions for testing. The firm did not perform sufficient procedures to test this revenue because its procedures were limited to (1) verifying that contracts were approved and (2) reading the issuer's technical accounting memorandums regarding the implementation of ASC Topic 606 for certain contracts that were entered into in years prior to the year under audit. (AS 2301.08)

The firm selected for testing a control that consisted of the issuer's review of risk grades assigned to commercial graded loans. The loan grades were an important factor in estimating the ALL. The sample size used by the firm to test the control was too small to provide sufficient appropriate audit evidence to support its conclusion that the control was operating effectively. (AS 2201.46)

The firm selected for testing a control that consisted of the issuer's review of problem loans. 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 the reasonableness of assigned loan grades was 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)

The firm selected for testing a control that consisted of the external review of loan grades. The sample size used by the firm to test the control was too small to provide sufficient appropriate audit evidence to support its conclusion that the control was operating effectively. As a result the sample size the firm used in its substantive procedures to test the reasonableness of assigned loan grades was 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 and .23 and .23A)

The firm's approach for substantively testing the significant estimate was to review and test management's process. The following deficiencies were identified: · For a portion of the estimate the firm did not perform sufficient procedures to evaluate the reasonableness of certain assumptions used by the issuer to develop the estimate because the firm did not evaluate whether the issuer had a reasonable basis for the assumptions used. (AS 2501.16)

The firm's approach for substantively testing the significant estimate was to review and test management's process. The following deficiencies were identified: · For another portion of the estimate the firm performed procedures to evaluate the reasonableness of the estimate including the reasonableness of certain assumptions using specific items selected by the firm and information prepared by external specialists engaged by the issuer. The firm did not perform any procedures with respect to the use of the work of the issuer's specialists as audit evidence. (AS 1105.A1—.A10)

The firm's approach for substantively testing the significant estimate was to review and test management's process. The following deficiencies were identified: · For another portion of the estimate the firm performed procedures to evaluate the reasonableness of the estimate including the reasonableness of certain assumptions using specific items selected by the firm and information prepared by external specialists engaged by the issuer. The firm did not perform any procedures to test the remaining balance of the estimate. (AS 1105.27; AS 2301.08 and .13)

The firm did not select journal entries and other adjustments for testing. (AS 2401.61)

The firm identified fraud criteria to identify and select journal entries for testing and obtained a listing of journal entries that met the criteria. The firm did not sufficiently test the journal entries that met the identified fraud risk criteria for evidence of possible material misstatement due to fraud because it limited its procedures to certain entries without having an appropriate rationale for limiting its testing to those journal entries. (AS 2401.61)

The issuer recognized certain revenue from product sales to customers. For certain customers the firm did not evaluate if it was probable that the issuer would collect substantially all of the consideration to which it believes it is entitled in order to recognize revenue in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers. Further the firm did not evaluate whether the timing of customer payments indicated the existence of implicit payment terms that would affect the recognition of revenue in conformity with FASB ASC Topic 606. (AS 2810.30)

The issuer recognizes revenues from product sales. The firm did not test whether the issuer had evaluated if the issuer and customers had approved the contracts and were committed to perform their respective obligations in conformity with FASB ASC Topic 606. (AS 2810.30)

The issuer recognizes revenues from product sales. The firm did not evaluate whether the issuer satisfied its performance obligations. (AS 2810.30)

The issuer performed a qualitative assessment of certain long-lived assets for impairment. The firm did not sufficiently evaluate whether the issuer considered certain relevant events or changes in circumstances in conformity with FASB ASC Topic 360 Property Plant and Equipment including certain of the issuer's disclosures in the financial statements that indicated that the carrying value of the long-lived assets may not have been recoverable. (AS 2810.03 and .30)

The issuer reported cash and cash equivalents at year end that included cash held by a law firm in an escrow account. The firm did not perform any procedures to determine if cash held by the law firm was restricted when evaluating the presentation and disclosure of the escrowed cash in conformity with FASB ASC Topic 210 Balance Sheet. (AS 2810.30 and .31)

The firm selected for confirmation a customer's accounts receivable balance and received an electronic response to its confirmation request. The firm did not consider performing procedures to address the risk associated with electronic responses. (AS 2310.29)

The issuer engaged an external specialist to determine the fair value of a reporting unit and recorded impairment losses related to intangible assets and goodwill based on that fair value. The firm did not evaluate revenue projections developed by the issuer and used by the external specialist to determine the fair value of the reporting unit. Further the firm did not evaluate contradictory evidence related to these projections. (AS 1210.12; AS 2810.03)

The issuer engaged an external specialist to determine the fair value of a reporting unit and recorded impairment losses related to intangible assets and goodwill based on that fair value. The firm did not identify and appropriately address the issuer's omission of certain disclosures required by FASB ASC Topic 350 Intangibles — Goodwill and Other and an inaccurate disclosure. (AS 2810.30 and .31)

The firm did not evaluate whether the issuer consistently applied its basis for stating inventories in conformity with FASB ASC Topic 330 Inventory. (AS 2810.30)

The firm did not identify and appropriately address a departure from GAAP related to the issuer's omission of a disclosure required by FASB ASC Topic 330. (AS 2810.30 and .31)

The issuer's year-end inventory included work-in-progress and finished goods. The firm did not obtain an understanding of and test the method the issuer used to allocate inventory costs to work-in-progress and finished goods. (AS 2301.08)

The issuer's year-end inventory included work-in-progress and finished goods. The firm did not test the accuracy and completeness of issuer information the firm used to test inventory costs. (AS 1105.10)

The firm did not perform sufficient procedures to test the issuer's impairment analysis of inventory because it limited its procedures to obtaining the issuer's impairment analysis and concluding the result of the analysis was consistent with historical margins. (AS 2501.07)

The engagement partner did not sufficiently review the work of engagement team members to evaluate whether the work was performed and documented the objectives of the procedures were achieved and the results of the work supported the conclusions reached because the engagement partner did not clear all review notes. Further the engagement partner reviewed audit programs in which certain steps (1) were signed off as having been completed when the related procedures were not documented in the work papers or (2) were inappropriately identified as being not applicable and thus not performed. (AS 1201.05)

The firm did not reconcile the financial statements with the underlying accounting records and examine material adjustments made during the course of preparing the financial statements. (AS 2301.41)

The firm did not evaluate the appropriateness of the issuer's presentation of certain accounts related to revenue. (AS 2301.08 and .11)

The firm did not identify and evaluate a GAAP departure related to the issuer's omission of certain disclosures related to revenue as required by FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2810.30 and .31)

The firm did not evaluate whether the issuer's classification of certain preferred stock as permanent equity was in conformity with FASB ASC Topic 480 Distinguishing Liabilities from Equity and FASB ASC Topic 815 Derivatives and Hedging given the issuer did not have enough authorized and unissued shares available to satisfy its obligations to issue shares of common stock upon exercise and the conversion of financial instruments. (AS 2301.08

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

The firm identified fraud criteria for journal entries and obtained a listing of all journal entries that met the criteria. The firm did not perform sufficient procedures to test those journal entries because it limited its procedures to certain entries without having an appropriate rationale. (AS 2401.61)

The issuer classified receivables into two categories and evaluated receivables for impairment either individually or collectively using various models and assumptions. The following deficiencies were identified with respect to one or both categories of receivables: · The firm selected for testing controls that consisted of reviews of the issuer's models and related assumptions used by management to estimate the value of receivables. For certain 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 2201.42 and .44)

The issuer classified receivables into two categories and evaluated receivables for impairment either individually or collectively using various models and assumptions. The following deficiencies were identified with respect to one or both categories of receivables: · The firm did not identify and test any controls over the write-off of receivables. (AS 2201.39)

The issuer classified receivables into two categories and evaluated receivables for impairment either individually or collectively using various models and assumptions. The following deficiencies were identified with respect to one or both categories of receivables: · The firm's approach for substantively testing the receivables was to review and test management's process. The firm did not sufficiently evaluate the reasonableness of the receivables because the firm did not perform procedures to test certain assumptions used by the issuer to estimate the value of receivables. (AS 2501.09 .10 and .11)

The issuer classified receivables into two categories and evaluated receivables for impairment either individually or collectively using various models and assumptions. The following deficiencies were identified with respect to one or both categories of receivables: · The firm did not evaluate the reasonableness of certain other assumptions used by management to estimate the valuation of a portion of certain receivables as the firm confined its evaluation of those assumptions to receivables that met pre-determined criteria and did not perform any substantive procedures to test the valuation of the remaining population of these receivables. (AS 1105.27)

The issuer classified receivables into two categories and evaluated receivables for impairment either individually or collectively using various models and assumptions. The following deficiencies were identified with respect to one or both categories of receivables: · The firm did not evaluate the reasonableness of assumptions and models used to appraise or otherwise estimate the fair value of collateral as used by management to estimate the value of certain receivables. (AS 2502.26 .28 and .38)

The issuer classified receivables into two categories and evaluated receivables for impairment either individually or collectively using various models and assumptions. The following deficiencies were identified with respect to one or both categories of receivables: · The firm did not perform any substantive procedures to test the write-off of certain other receivables. (AS 2501.07)

The component reported revenue from multiple revenue types and for purposes of the audit the firm grouped revenue into three categories. The following deficiencies were identified: · For one category of revenue that was generally earned upon product shipment the firm did not perform any procedures to evaluate differences identified for certain revenue transactions selected for testing between the shipping dates and dates in which revenue was recognized to determine whether revenue was recognized in the proper period. (AS 2301.08; AS 2810.03)

The firm's approach for testing the fair value measurement of goodwill was to review and test management's process. The following deficiencies were identified: · The firm did not evaluate the reasonableness of the earnings assumptions beyond inquiring of management as to certain cost saving initiatives underlying those assumptions. (AS 2502.26 and .28)

The firm's approach for testing the fair value measurement of goodwill was to review and test management's process. The following deficiencies were identified: · The firm did not evaluate historical differences between earnings declines experienced by the issuer and those included in an industry market report that was used to support certain assumptions. (AS 2502.26 .28 .31 and .36)

The firm selected for testing a control that consisted of a review of all changes made to customer data including sales prices within the subsidiary's system. The firm did not identify and test any controls over the completeness of customer data included in a report used in the operation of this control. (AS 2201.39)

The sample size the firm used in certain of its substantive procedures to test revenue was 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)