Explorer

In connection with our review the issuer reevaluated its disclosure for this related party transaction and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently corrected this misstatement in a restatement of its financial statements and the firm revised and reissued its report on the financial statements. The firm did not identify and evaluate a departure from GAAP related to the issuer's omission of required disclosure of a related party transaction in conformity with FASB ASC Topic 850 Related Party Disclosures. (AS 2410.17; AS 2810.30 and .31)

The issuer issued common stock to related parties in exchange for certain services. The following deficiency was identified: · The firm did not evaluate the appropriateness of the issuer's determination of the grant date for the issuance of certain common stock. (AS 2410.17)

The issuer issued common stock to related parties in exchange for certain services. The following deficiency was identified: · The firm did not evaluate whether the related compensation expense was recorded in the appropriate period at the appropriate amount. (AS 2410.17)

The issuer issued common stock to related parties in exchange for certain services. The following deficiency was identified: · The firm did not perform procedures to test certain other stock-based compensation expense beyond obtaining approval of the issuance of the underlying common stock and testing the mathematical accuracy of the issuer's calculation of this expense. (AS 2410.12)

The issuer settled all debts from prior related parties as part of a stock purchase agreement and recognized a gain on the forgiveness of these debts. The firm did not perform procedures to test this transaction beyond obtaining the executed stock purchase agreement and the journal entry. (AS 2410.12)

The firm did not perform substantive procedures to test the fair value of certain investments beyond (1) comparing the recorded fair value to record keeper's reports and (2) comparing the total balance and percentage of total investments for the type of investment to the prior year. (AS 2501.07)

The firm selected a sample for testing of participant contributions and employer matching contributions. For all but one of the selections the firm did not perform any procedures to test or test any controls over the accuracy of the salary information in issuer-provided reports used in the firm's testing of contributions. (AS 1105.10)

The firm did not perform any procedures to evaluate the reliability of certain external data it used to test the fair value of certain investments. (AS 1105.04 and .06)

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 the firm (1) did not consider appropriate factors such as the firm's established tolerable misstatement and the characteristics of the population and (2) included erroneous inputs as to the size of the population identification of a significant risk and the level of assurance to be obtained from other procedures. (AS 2315.16 .23 and .23A)

The issuer engaged an external specialist to determine its enterprise value and used that valuation in its impairment analyses for its goodwill and intangible assets. The following deficiencies were identified: • The firm did not evaluate whether the issuer's impairment analyses were performed in accordance with FASB ASC Topic 350 Intangibles — Goodwill and Other. (AS 2810.30)

The issuer engaged an external specialist to determine its enterprise value and used that valuation in its impairment analyses for its goodwill and intangible assets. The following deficiencies were identified: • The firm did not test the completeness and accuracy of data used by the external specialist to determine the enterprise value. (AS 1210.12)

The issuer engaged an external specialist to determine its enterprise value and used that valuation in its impairment analyses for its goodwill and intangible assets. The following deficiencies were identified: • The firm did not obtain an understanding of the process used by management to determine fair value of goodwill and each of the intangible assets and the resulting impairment. (AS 2502.09)

The issuer engaged an external specialist to determine its enterprise value and used that valuation in its impairment analyses for its goodwill and intangible assets. The following deficiencies were identified: • The firm did not evaluate the reasonableness of assumptions used in the impairment analyses. (AS 2502.26 and .28)

The issuer acquired businesses with contingent equity consideration arrangements. The firm did not identify and appropriately address a departure from GAAP related to the issuer's classification of the contingent consideration as equity rather than liabilities as required by FASB ASC Topic 815 Derivatives and Hedging. (AS 2810.30) Unrelated and prior to our review the issuer reevaluated its accounting treatment for the contingent consideration and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently corrected this misstatement in a restatement of its financial statements and the firm revised and reissued its report on the financial statements.

The firm selected for testing a control related to management's review of equity and equity activity schedules which were derived from reports provided by the service provider. The firm did not (as discussed above) sufficiently test controls over the accuracy and completeness of the information the issuer used in the operation of the control. (AS 2201.39)

The firm used data and reports from the service provider in its substantive testing of equity but did not test or sufficiently test controls over the completeness of the data and reports. (AS 1105.10)

The issuer's revenue processes were highly automated with transactions being initiated processed and recorded by multiple information-technology ('IT') systems. The firm used sales payment processing and cash receipt data generated or maintained by the IT systems in its substantive revenue testing. However the firm did not test or in the alternative identify and test any controls over the completeness and accuracy of the data. (AS 1105.10)

For its substantive revenue testing the firm selected transactions from the prepaid deposits and deferred revenue populations as of the end of the year under audit. The firm did not perform any substantive procedures to test transactions for which revenue had been recognized during the year. (AS 2301.08)

The firm did not evaluate whether the issuer considered in its impairment analysis certain impairment indicators including recurring operating losses net losses negative cash flows from operations and cumulative net losses since inception of the issuer. (AS 2501.07; AS 2810.03)

The firm did not (1) obtain an understanding of how the issuer developed its inventory reserve and (2) perform procedures to test the inventory reserve beyond inquiry of management. Further the firm did not evaluate the effects of an impairment charge recorded by the issuer on the valuation of other similar assets in inventory. (AS 2501.07; AS 2810.03)

Certain inventory representing a significant proportion of current assets was held by an outside custodian. The firm did not perform sufficient procedures to test the existence of this inventory because it limited its procedures to confirming the quantities of this inventory with the custodian. (AS 2510.14)

In performing its substantive procedures of the issuer's revenue the firm did not sufficiently evaluate whether (1) the issuer's arrangements with a third party represented a contract with an identifiable customer and (2) the issuer's performance obligations should be evaluated jointly or separately in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers ('ASC 606'). (AS 2810.30)

The firm used certain price and quantity information from outside sources in its substantive testing of revenue but did not perform any procedures to evaluate the relevance and/or reliability of such information. (AS 1105.04 and .06; AS 2502.40)

In its analytical procedures over revenue the firm used data from the issuer to develop its expectations but did not test the accuracy and completeness of the data. (AS 2305.16)

For revenue transactions and accounts receivable selected for substantive testing the firm did not examine the underlying source documents. (AS 2301.08)

In its analytical procedures over revenue the firm did not (1) evaluate the plausibility and predictability of the relationship among the data used in developing the revenue expectations (2) establish thresholds for investigating differences from expectations and (3) perform procedures to evaluate differences identified beyond inquiries of management. (AS 2305.13 .14 .20 and .21)

With respect to service agreements with other parties the issuer prepared monthly schedules of its revenue earned from those agreements. The firm did not test the accuracy and completeness of certain data included in such schedules. (AS 1105.10)

With respect to service agreements with other parties the issuer prepared monthly schedules of its revenue earned from those agreements. The firm did not evaluate the inconsistency of certain data between the schedules the service agreements and the financial statement disclosures. (AS 2810.03)

The issuer engaged a specialist to assist in its impairment analysis of its finite-lived intangible assets by determining the fair value of the assets. The firm did not evaluate the reasonableness of the assumptions used by the issuer-engaged specialist in determining the fair value of the assets. (AS 2502.26 and .28)

The issuer engaged a specialist to assist in its impairment analysis of its finite-lived intangible assets by determining the fair value of the assets. The firm did not test the cash flow projections the issuer provided to the issuer-engaged specialist. (AS 1210.12)

The firm did not test or in the alternative identify and test any controls over the completeness and accuracy of a management report that the firm used in its substantive testing of revenue. (AS 1105.10)

The firm did not perform sufficient revenue cutoff procedures because the firm's testing was limited to sales transactions recorded on one date and shipped by one carrier. (AS 2301.08)

The firm did not sufficiently evaluate the reasonableness of the issuer's allowance for doubtful accounts because it did not evaluate (1) the appropriateness of the issuer's method for determining the reserve and (2) whether the recorded reserve was determined in accordance with that method. (AS 2501.07)

Long-lived assets were assessed as having a significant risk. The firm relied on control testing performed by management to assess the operating effectiveness of certain controls over long-lived assets. A member of management who performed the control testing was also the control owner of the controls selected for testing. The firm did not evaluate the objectivity of the member of management who performed the control testing and whether its reliance on management's control testing work was appropriate. (AS 2201.18; AS 2605.10)

The firm selected for testing a control related to management's review and approval of purchases of long-lived assets. The firm did not evaluate the specific review procedures the control owner performed to review and approve account codes assigned to purchases. (AS 2201.42 and .44)

The firm selected for testing a control related to management's review and approval of purchases of long-lived assets. The firm did not identify and test any controls that addressed the completeness of the purchase invoices used in the operation of the control. (AS 2201.39)

The firm selected for testing a control related to management's quarterly review of a long-lived assets schedule intended to assess whether changes in the long-lived assets balances are reasonable. The firm did not identify and test any controls over the accuracy and completeness of the long-lived assets schedules used in the operation of the control. (AS 2201.39)

The issuer engaged an external service provider to provide transfer agent services and subscription agent services. The firm did not test any of the complementary user controls described in the service auditor's report for the service provider. (AS 2201.B22)

During the year the issuer acquired multiple businesses. For one business combination the firm did not perform any substantive procedures to test the fair value of the assets acquired and liabilities assumed. (AS 2502.15)

The issuer reported a reserve for excess and obsolete inventory. The firm did not perform procedures to test this reserve beyond reading issuer-prepared memos vouching certain historical sales amounts used in the determination of the reserve and performing recalculations of certain amounts. (AS 2501.07)

The issuer held certain inventory at a public warehouse. The firm performed an inventory observation subsequent to year end. The firm did not test (1) whether the contents of counted pallets and boxes matched the items included in the issuer's year-end inventory; and (2) intervening transactions between the issuer's year end and the date of its inventory observation. (AS 2510.14)

The firm used certain price and quantity information from external sources in its substantive testing of revenue but did not perform any procedures to evaluate the relevance and reliability of such information. (AS 1105.04 and .06)

The firm developed an independent expectation to test revenue but did not evaluate the relevance and reliability of data used to develop its expectation. (AS 1105.04 and .06; AS 2501.23)

For another business combination the issuer used an external specialist to estimate the fair value of certain of the acquired assets. For certain assets the fair values were determined using forecasted cash flows. The following deficiencies were identified: - As part of its assessment of the reasonableness of the cash-flow forecast for a certain asset the firm obtained evidence that appeared to contradict an assumption used by the specialist with respect to asset quantities. The firm did not perform procedures beyond inquiry of management to evaluate this contradictory evidence. (AS 2502.26 .28 .31 and .36)

For another business combination the issuer used an external specialist to estimate the fair value of certain of the acquired assets. For certain assets the fair values were determined using forecasted cash flows. The following deficiencies were identified: - For certain assets the firm did not perform procedures beyond inquiry of management to evaluate the reasonableness of certain significant assumptions underlying the cash-flow forecasts. (AS 2502.26 and .28)

For another business combination the issuer used an external specialist to estimate the fair value of certain of the acquired assets. For certain assets the fair values were determined using forecasted cash flows. The following deficiencies were identified: - The firm did not perform any procedures to test the completeness of certain liabilities assumed. (AS 2301.08)

For another business combination the issuer used an external specialist to estimate the fair value of certain of the acquired assets. For certain assets the fair values were determined using forecasted cash flows. The following deficiencies were identified: - The firm did not perform any procedures to test the fair value of certain liabilities assumed. (AS 2502.15)

For another business combination the issuer used an external specialist to estimate the fair value of certain of the acquired assets. For certain assets the fair values were determined using forecasted cash flows. The following deficiencies were identified: - The firm did not identify and appropriately address an inconsistency between the issuer's disclosure of goodwill and other liabilities associated with this acquisition and the issuer's supporting documentation. (AS 2810.30 and .31)

The issuer recognized certain revenue based on quantities and specified rates generally in exchange for noncash consideration. Any noncash consideration received at contract inception was recorded as a contract liability. The following deficiencies were identified: - The firm used data from the issuer's system in its procedures to test certain of this revenue. The firm did not test or in the alternative identify and test any controls over the accuracy and completeness of this data. (AS 1105.10)

The issuer recognized certain revenue based on quantities and specified rates generally in exchange for noncash consideration. Any noncash consideration received at contract inception was recorded as a contract liability. The following deficiencies were identified: - For certain other of this revenue the firm did not test the selling prices for individual services provided. (AS 2301.08)