Explorer

The issuer used an information-technology (IT) system to initiate process and record transactions related to inventory at one business unit. In its testing of controls over this inventory the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by this IT system. · With respect to change management the firm selected for testing a control over the issuer's review of changes to the production environment for this IT system. The firm did not test the aspects of this control that addressed whether unauthorized changes could be made directly to the production environment. (AS 2201.42 and .44)

The issuer used an information-technology (IT) system to initiate process and record transactions related to inventory at one business unit. In its testing of controls over this inventory the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by this IT system. · With respect to user access the firm selected for testing a control that consisted of the issuer's periodic review of user access to this IT system. The firm did not evaluate the specific review procedures that the control owners performed to determine whether previously granted privileged access continued to be appropriate. (AS 2201.42 and .44)

The firm used certain of these data and reports in its substantive testing of these disclosures but did not perform any procedures to test or test any controls over the accuracy and completeness of these data and reports. (AS 1105.10) In connection with our review the issuer reevaluated its controls over its disclosures and concluded that a material weakness existed that had not been previously identified. The issuer subsequently revised its report on ICFR to reflect this material weakness and the firm modified its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report.

The issuer performed cycle counts of this inventory and used its IT system to determine the frequency with which the items should be counted by assigning a count designation to each inventory item. The following additional deficiencies were identified: · The firm selected for testing a control over the issuer's review of whether a count designation was assigned to each inventory item. The firm identified a deviation in the operation of this control but did not evaluate the effect of this deviation on the operating effectiveness of the control. (AS 2201.48)

The issuer performed cycle counts of this inventory and used its IT system to determine the frequency with which the items should be counted by assigning a count designation to each inventory item. The following additional deficiencies were identified: · The firm selected for testing an automated control over the assignment of the count designations but did not test whether the issuer's IT system was properly configured to assign the appropriate count designation to each inventory item. (AS 2201.42 and .44)

The issuer performed cycle counts of this inventory and used its IT system to determine the frequency with which the items should be counted by assigning a count designation to each inventory item. The following additional deficiencies were identified: · The firm selected for testing a control that included the issuer's review of the overall cycle-count results. The firm did not test the aspect of this control that addressed whether inventory counts were performed in accordance with the designated count frequency. (AS 2201.42 and .44)

The issuer performed cycle counts of this inventory and used its IT system to determine the frequency with which the items should be counted by assigning a count designation to each inventory item. The following additional deficiencies were identified: · Due to the deficiencies discussed above the firm did not obtain sufficient appropriate audit evidence that the cycle-count procedures the issuer 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)

The issuer disclosed that it had certain leases that had been executed by year end but had not yet commenced. The firm did not perform any procedures to evaluate whether any of these leases should have been recorded as right-of-use assets and lease liabilities at year end. (AS 2301.08)

To evaluate the issuer's classification of leases as operating or financing the firm tested a sample of current-year lease additions but did not perform any procedures to test the fair values of the underlying assets that the issuer used in determining the leases' classification. (AS 2301.08)

The firm used issuer-prepared schedules in its substantive testing of certain of the issuer's lease disclosures but did not perform any procedures to test or test any controls over the accuracy and completeness of these schedules. (AS 1105.10)

The firm selected for testing a control that consisted of the issuer's validation of the models that the issuer used in the valuation of certain of its investment securities and derivatives. The firm did not evaluate the specific review procedures that the control owners performed to assess the results of the testing of these models. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the issuer's quarterly assessment of qualitative and quantitative factors to determine whether indicators of potential impairment of certain intangible assets existed. The firm did not identify that this control was not designed to identify and evaluate certain quantitative indicators of potential impairment. (AS 2201.42)

The issuer used an IT system to develop certain cost estimates related to its asset retirement obligations (ARO). The firm selected for testing an automated control over changes to the configuration of this IT system. The firm identified a deviation in the operation of this control but did not evaluate the effect of this deviation on the operating effectiveness of the control. (AS 2201.48)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. During the year the issuer acquired a business. The acquired assets primarily consisted of oil and gas properties that had oil and gas reserves assigned. The issuer used company-employed specialists to estimate the issuer's oil and gas reserves that were used in the (1) valuation of the acquired oil and gas properties and (2) calculation of depletion expense for these acquired oil and gas properties. The issuer determined the fair value of the acquired oil and gas properties based on discounted cash flows it developed using various assumptions including future production volumes. The company's specialists used financial and non-financial data produced by the issuer and assumptions developed by the issuer or the company's specialists to estimate the oil and gas reserves underlying the future production volumes. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's review of the future production volume assumptions. In evaluating the design of this control the firm did not identify that the control owner did not evaluate the methods assess the accuracy and completeness of the non-financial data and evaluate the reasonableness of the non-financial assumptions used by the company's specialists. (AS 2201.42)

The issuer performed its annual analysis of goodwill for potential impairment as of an interim date. The firm did not evaluate an indicator of potential impairment that existed at year end. (AS 2301.08; AS 2810.03)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. During the year the issuer acquired a business. The acquired assets primarily consisted of oil and gas properties that had oil and gas reserves assigned. The issuer used company-employed specialists to estimate the issuer's oil and gas reserves that were used in the (1) valuation of the acquired oil and gas properties and (2) calculation of depletion expense for these acquired oil and gas properties. The issuer determined the fair value of the acquired oil and gas properties based on discounted cash flows it developed using various assumptions including future production volumes. The company's specialists used financial and non-financial data produced by the issuer and assumptions developed by the issuer or the company's specialists to estimate the oil and gas reserves underlying the future production volumes. The following deficiencies were identified: · The firm did not perform procedures to test or sufficiently test controls over the accuracy and completeness of the non-financial data used by the company's specialists. (AS 1105.A8a)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. During the year the issuer acquired a business. The acquired assets primarily consisted of oil and gas properties that had oil and gas reserves assigned. The issuer used company-employed specialists to estimate the issuer's oil and gas reserves that were used in the (1) valuation of the acquired oil and gas properties and (2) calculation of depletion expense for these acquired oil and gas properties. The issuer determined the fair value of the acquired oil and gas properties based on discounted cash flows it developed using various assumptions including future production volumes. The company's specialists used financial and non-financial data produced by the issuer and assumptions developed by the issuer or the company's specialists to estimate the oil and gas reserves underlying the future production volumes. The following deficiencies were identified: · The firm did not evaluate the reasonableness of the significant future production volume assumptions beyond comparing these assumptions to historical production volume information from the acquired business. (AS 1105.A8b)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. During the year the issuer acquired a business. The acquired assets primarily consisted of oil and gas properties that had oil and gas reserves assigned. The issuer used company-employed specialists to estimate the issuer's oil and gas reserves that were used in the (1) valuation of the acquired oil and gas properties and (2) calculation of depletion expense for these acquired oil and gas properties. The issuer determined the fair value of the acquired oil and gas properties based on discounted cash flows it developed using various assumptions including future production volumes. The company's specialists used financial and non-financial data produced by the issuer and assumptions developed by the issuer or the company's specialists to estimate the oil and gas reserves underlying the future production volumes. The following deficiencies were identified: · The firm did not evaluate the reasonableness of the significant non-financial assumptions that were developed by the company's specialists or the issuer and used by the company's specialists to develop the future production volumes. (AS 1105.A8b; AS 2501.16)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. During the year the issuer acquired a business. The acquired assets primarily consisted of oil and gas properties that had oil and gas reserves assigned. The issuer used company-employed specialists to estimate the issuer's oil and gas reserves that were used in the (1) valuation of the acquired oil and gas properties and (2) calculation of depletion expense for these acquired oil and gas properties. The issuer determined the fair value of the acquired oil and gas properties based on discounted cash flows it developed using various assumptions including future production volumes. The company's specialists used financial and non-financial data produced by the issuer and assumptions developed by the issuer or the company's specialists to estimate the oil and gas reserves underlying the future production volumes. The following deficiencies were identified: · The firm did not perform any procedures beyond inquiry to evaluate whether the methods used by the company's specialists were appropriate under the circumstances. (AS 1105.A8c)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. During the year the issuer acquired a business. The acquired assets primarily consisted of oil and gas properties that had oil and gas reserves assigned. The issuer used company-employed specialists to estimate the issuer's oil and gas reserves that were used in the (1) valuation of the acquired oil and gas properties and (2) calculation of depletion expense for these acquired oil and gas properties. The issuer recorded depletion expense for the acquired oil and gas properties using the oil and gas reserves that the company's specialists estimated using financial and non-financial data produced by the issuer and assumptions developed by the issuer or the company's specialists. The following deficiencies were identified: · The firm did not perform procedures to test or test any controls over the accuracy and completeness of the financial and non-financial data used by the company's specialists. (AS 1105.A8a)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify the deficiencies below. During the year the issuer acquired a business. The acquired assets primarily consisted of oil and gas properties that had oil and gas reserves assigned. The issuer used company-employed specialists to estimate the issuer's oil and gas reserves that were used in the (1) valuation of the acquired oil and gas properties and (2) calculation of depletion expense for these acquired oil and gas properties. The issuer recorded depletion expense for the acquired oil and gas properties using the oil and gas reserves that the company's specialists estimated using financial and non-financial data produced by the issuer and assumptions developed by the issuer or the company's specialists. The following deficiencies were identified: · The firm did not evaluate the reasonableness of the significant financial and non-financial assumptions that were developed by the company's specialists or the issuer and used by the company's specialists to develop the future production volumes. (AS 1105.A8b; AS 2501.16)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the issuer's estimate of the relative standalone selling prices. The estimated standalone selling prices were based on an expected cost plus a margin approach that involved significant assumptions. The following deficiencies were identified: · The firm did not perform procedures beyond reading an issuer-prepared analysis to assess whether the services promised in the issuer's contracts were distinct and should have been accounted for as separate performance obligations. (AS 2301.08 and .13) In connection with our review the issuer reevaluated its accounting for these arrangements and concluded that misstatements existed that had not been previously identified. The issuer subsequently filed a Form 8-K disclosing that its previously issued financial statements should no longer be relied upon and that it plans on restating its financial statements to correct these misstatements.

The firm did not perform any substantive procedures to test the allowance for credit impairment for these investment securities. (AS 2501.07)

The firm did not identify and test any controls over the issuer's ACL for certain loans. (AS 2201.39)

The firm did not perform any substantive procedures to test the ACL for these loans. (AS 2501.07)

The issuer disclosed the estimated fair values for certain loans measured at amortized cost. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of this disclosure but did not identify and test any controls over the accuracy and completeness of the issuer-prepared schedules used in the operation of this control. (AS 2201.39)

The issuer disclosed the estimated fair values for certain loans measured at amortized cost. The following deficiencies were identified: · The firm did not perform substantive procedures to test the fair values of these loans beyond comparing the amounts disclosed to the issuer-prepared schedules discussed above. (AS 2501.07)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the issuer's estimate of the relative standalone selling prices. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of certain contracts under these types of arrangements for appropriate revenue recognition. The firm did not evaluate the specific review procedures that the control owners performed to evaluate whether the contracts contained embedded leases and whether all performance obligations were identified. (AS 2201.42 and .44)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the issuer's estimate of the relative standalone selling prices. The following deficiencies were identified: · The firm did not sufficiently evaluate whether certain contracts contained embedded leases because it did not evaluate certain terms that may have met the definition of a lease. (AS 2301.08; AS 2810.03)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the issuer's estimate of the relative standalone selling prices. The following deficiencies were identified: · The firm did not sufficiently evaluate whether all performance obligations were identified for certain contracts because it did not identify that the contracts contained an option that may have represented a material right. (AS 2301.08; AS 2810.03)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the issuer's estimate of the relative standalone selling prices. The following deficiencies were identified: · The firm did not identify and test any controls over the issuer's determination of the standalone selling prices. (AS 2201.39)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the issuer's estimate of the relative standalone selling prices. The following deficiencies were identified: · The firm did not perform any substantive procedures to evaluate the reasonableness of the significant assumptions the issuer used to estimate standalone selling prices. (AS 2501.16)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the issuer's estimate of the relative standalone selling prices. The estimated standalone selling prices were based on an expected cost plus a margin approach that involved significant assumptions. The following deficiencies were identified: · For certain contracts the issuer recognized revenue over time using an output method to measure its progress toward completion of its performance obligations. The firm did not evaluate whether this method was in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2501.10) In connection with our review the issuer reevaluated its accounting for these arrangements and concluded that misstatements existed that had not been previously identified. The issuer subsequently filed a Form 8-K disclosing that its previously issued financial statements should no longer be relied upon and that it plans on restating its financial statements to correct these misstatements.

The firm did not perform substantive procedures to evaluate whether the issuer's capitalization of certain contract costs was in conformity with FASB ASC Topic 340 Other Assets and Deferred Costs beyond for a selection of costs capitalized during the year reading the contracts and comparing the costs to the issuer's subledger. (AS 2301.08)

The firm did not perform any substantive procedures to evaluate whether the period the issuer used to amortize the capitalized contract costs for contracts with multiple performance obligations was in conformity with FASB ASC Topic 340. (AS 2301.08)

The firm identified control deficiencies related to controls over certain revenue contracts at one of the issuer's locations. The firm did not evaluate the severity of these control deficiencies individually or in combination to determine whether they represented a material weakness. (AS 2201.62)

The firm sent positive confirmation requests to the issuer's customers for a sample of accounts receivable. For certain confirmations that were not returned the firm did not perform alternative procedures that provided sufficient appropriate audit evidence that these balances represented valid receivables as of the confirmation date. (AS 2310.31)

The firm selected for testing a control that included the review of the data the issuer used to estimate the ACL but did not evaluate the specific review procedures that the control owner performed to assess the accuracy and completeness of these data. (AS 2201.42 and .44)

During the year the issuer acquired a business. The firm selected for testing a control that consisted of the issuer's review of the valuation of certain assets acquired and liabilities assumed. The firm did not identify and test any controls over the accuracy and completeness of a system-generated report that the control owners used in the operation of this control for certain liabilities assumed. (AS 2201.39)

Certain of the issuer's revenue arrangements included multiple performance obligations. In its evaluation of the issuer's revenue recognition for these arrangements the firm did not evaluate beyond reading certain issuer-prepared memorandums (1) whether the issuer identified all performance obligations in its customer contracts and (2) certain contractual terms and conditions that could affect the issuer's revenue recognition. (AS 2301.08)

The issuer disclosed various material weaknesses including deficiencies related to segregation of duties. In understanding the issuer's financial reporting process the firm identified that the general ledger system allowed individuals to both post and approve journal entries and to edit journal entries after they have been approved. The firm did not perform any substantive procedures to address these risks related to inappropriate segregation of duties. (AS 2301.08; AS 2401.61)

The firm selected for testing a control that consisted of the issuer's review of its evaluation of its ability to continue as a going concern. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of certain significant assumptions the issuer used to develop the forecasted cash flows used in its evaluation. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the issuer's review and approval of manual journal entries prior to posting them to the general ledger. In evaluating the design of this control the firm did not identify that the general ledger system allowed the control owners to modify journal entries prior to posting. (AS 2201.42)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the issuer's estimate of the relative standalone selling prices. The estimated standalone selling prices were based on an expected cost plus a margin approach that involved significant assumptions. The following deficiencies were identified: · The firm did not perform any substantive procedures to evaluate the reasonableness of the expected costs of satisfying the performance obligations and related margins. (AS 2501.16) In connection with our review the issuer reevaluated its accounting for these arrangements and concluded that misstatements existed that had not been previously identified. The issuer subsequently filed a Form 8-K disclosing that its previously issued financial statements should no longer be relied upon and that it plans on restating its financial statements to correct these misstatements.

The issuer recognized certain revenue based on the issuer's estimate of the number of customers enrolled in plans under which the issuer provided services. The firm did not sufficiently evaluate whether the issuer had a reasonable basis for this significant assumption because it did not evaluate the relevance of certain historical customer data that the issuer adjusted and used to develop this significant assumption. (AS 1105.04 and .06; AS 2501.16)

The firm did not perform any substantive procedures to evaluate whether certain payments that the issuer recognized as revenue met the criteria for revenue recognition set forth in FASB ASC Topic 606. (AS 2301.08)

The firm did not perform any substantive procedures to test certain accounts receivable. (AS 2301.08)

The firm did not identify and evaluate various misstatements in the issuer's disclosures related to accounts receivable and other liabilities. (AS 2810.30 and .31)

The issuer disclosed that it presented its accounts receivable net of certain unpaid costs. The firm did not perform any substantive procedures to evaluate whether this presentation was in conformity with FASB ASC Topic 210 Balance Sheet. (AS 2301.08)

The firm did not identify and test any controls over the issuer's allowance for credit impairment for certain investment securities. (AS 2201.39)