Explorer

The issuer initiated and processed sales transactions at numerous business units. The firm designated certain business units as subject to more extensive audit procedures and used an other accounting firm to test one of these business units. The following deficiencies were identified: · The firm did not identify and test any controls over the accuracy of the pricing information the issuer used to record revenue at the business units it tested. (AS 2201.39)

The issuer initiated and processed sales transactions at numerous business units. The firm designated certain business units as subject to more extensive audit procedures and used an other accounting firm to test one of these business units. The following deficiencies were identified: · The firm identified a risk of material misstatement that applied to all of these business units and tested a control that addressed this risk at the business units it tested but it did not instruct the other accounting firm to test this control at the business unit that firm tested. (AS 2101.11 and .12; AS 2201.B10)

The issuer recognized certain revenue over time based on costs incurred to date relative to total estimated costs to complete the contract. The firm did not perform any procedures beyond inquiring of management to evaluate the reasonableness of the significant assumptions that the issuer used to develop the estimated costs to complete the contracts the firm selected for testing. (AS 2501.16)

The issuer recognized certain revenue over time based on costs incurred to date relative to total estimated costs to complete the contract. The following deficiencies were identified: · The firm did not perform any procedures beyond inquiring of project managers to evaluate the reasonableness of the significant assumptions that the issuer used to develop the estimated costs to complete the contracts the firm selected for testing. (AS 2501.16)

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

The firm selected for testing various controls that consisted of the issuer's reviews of additions to long-lived assets. The firm did not evaluate the specific review procedures that the control owners performed to evaluate whether additions were properly capitalized and allocated to the correct asset group. (AS 2201.42 and .44)

The issuer recognized certain revenue over time based on costs incurred to date relative to total estimated costs to complete the contract. The firm did not perform any procedures beyond inquiring of management to evaluate the reasonableness of the significant assumptions that the issuer used to develop the estimated costs to complete the contracts the firm selected for testing. (AS 2501.16)

The issuer recorded a partial valuation allowance against its recorded deferred tax assets based on forecasted taxable income which included various significant assumptions. The following deficiencies were identified: · For the first year of the forecast period the firm did not sufficiently evaluate the reasonableness of a significant assumption because its procedures were limited to comparing the assumption to the issuer's recent experience. (AS 2501.16)

The issuer recorded a partial valuation allowance against its recorded deferred tax assets based on forecasted taxable income which included various significant assumptions. The following deficiencies were identified: · For the remaining years of the forecast period the firm did not perform any procedures to evaluate the reasonableness of the significant assumptions. (AS 2501.16)

The issuer recorded a partial valuation allowance against its recorded deferred tax assets based on forecasted taxable income which included various significant assumptions. The following deficiencies were identified: · The firm did not perform procedures to test or test controls over the accuracy and completeness of certain information produced by the issuer that the firm used in its substantive testing of the deferred tax assets that were subject to the valuation allowance. (AS 1105.10)

The issuer recorded a partial valuation allowance against its recorded deferred tax assets based on forecasted taxable income which included various significant assumptions. The following deficiencies were identified: · The firm did not identify and evaluate a misstatement in a required disclosure under FASB ASC Topic 740 Income Taxes. (AS 2810.30 and .31)

The issuer performed a combination of cycle counts and full physical counts of inventory held at certain locations. To test the existence of inventory at these locations the firm performed independent physical counts of inventory before year end. The firm did not test any intervening transactions and did not inspect any records of the issuer's counts and procedures on which the year-end inventory was based. (AS 2510.12)

The issuer recognized revenue based on the rates in the contracts with its customers and the amount of time incurred to provide its services that was maintained in one of the issuer's information-technology (IT) systems. The firm did not perform sufficient procedures to test the accuracy and completeness of the time data because its procedures were limited to comparing the issuer's data to data from an external source and inspecting the issuer's reconciliation of the data to data the issuer obtained from its customers without evaluating the reliability of the data from these external sources. (AS 1105.04 .06 and .10)

For the remaining asset group the issuer identified events during the year indicating that the carrying value of its long-lived assets for that asset group may not be recoverable and performed an impairment analysis. The firm used an issuer-prepared schedule in its evaluation of the issuer's assessment of those long-lived assets for possible impairment but did not perform any procedures to test the accuracy of certain information in this schedule. (AS 1105.10)

The issuer recognized revenue from certain contracts over time based on estimated costs incurred relative to total estimated costs to complete the contract. The firm did not evaluate the reasonableness of the significant standard cost assumption that the issuer used to develop the estimated costs incurred on and the estimated costs to complete the contracts the firm selected for testing. (AS 2501.16)

At two of the issuer's locations the issuer valued certain inventory at standard cost and capitalized certain labor and overhead costs to inventory based on the difference between the actual costs incurred and the costs recorded at standard. The firm did not perform sufficient substantive procedures to test the capitalized variance recorded by the issuer at year end because it did not evaluate whether the amount the issuer used to calculate the capitalized variance represented the actual difference between actual and standard costs. (AS 2301.08)

At one of these locations the issuer valued certain inventory using the last-in first-out (LIFO) method. The firm used certain information provided by the issuer to test the LIFO reserve but did not perform any procedures to test or test any controls over the accuracy of this information. (AS 1105.10)

The firm identified a control deficiency related to the issuer's control over the occurrence and cut-off of certain revenue. The firm identified and tested various controls that it believed would mitigate this deficiency but did not identify that these compensating controls either did not address the risk of material misstatement related to whether revenue occurred and was recorded in the appropriate period or did not operate at a level of precision that would prevent or detect a misstatement that could be material. (AS 2201.68)

The issuer recognized revenue from certain contracts over time based on costs incurred to date relative to total estimated costs to complete the contract. The firm did not sufficiently test the estimated total costs to complete a certain contract it selected for testing because it did not perform any substantive procedures to evaluate the reasonableness of the remaining number of units the issuer expected to deliver that the issuer used to develop the estimated total costs to complete. (AS 2501.16)

The issuer recorded an excess and obsolete (E&O) inventory reserve for certain inventory based on the inventory on hand compared to the sales forecast for this inventory. The firm did not perform any procedures to evaluate the reasonableness of the sales forecast that the issuer used to develop this E&O inventory reserve. (AS 2501.16)

The issuer used forecasted cash flows in its evaluation of its ability to continue as a going concern and concluded that the substantial doubt was alleviated by its plans. The issuer also used forecasted cash flows in its evaluation of certain long-lived assets for possible impairment. The issuer developed both of these forecasted cash flows using various assumptions including certain employee data. The firm used certain labor hour information in its substantive testing of the employee data for each of these forecasted cash flows but did not perform any procedures to test the accuracy and completeness of this information. (AS 1105.10; AS 2415.03)

For certain assets that were evaluated for impairment the issuer determined adjustment factors that were important inputs used in developing this estimate. The following deficiencies were identified: · The firm selected for testing controls that consisted of the issuer's review of this estimate including an assessment of these inputs for reasonableness. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of these inputs. (AS 2201.42 and .44)

For certain assets that were evaluated for impairment the issuer determined adjustment factors that were important inputs used in developing this estimate. The following deficiencies were identified: · The firm's approach for substantively testing the reasonableness of this estimate was to test the issuer's process. The firm did not perform any procedures to evaluate the reasonableness of the significant assumptions the issuer used to develop this estimate. (AS 2501.16)

For certain assets that were evaluated for impairment the issuer determined adjustment factors that were important inputs used in developing this estimate. The following deficiencies were identified: · The firm's approach for substantively testing the reasonableness of this estimate was to test the issuer's process. The firm did not perform any procedures to evaluate the relevance of certain data that the issuer used to develop the adjustment factors. (AS 1105.04 and .06)

During the year the issuer purchased certain collateralized loans at a discount and engaged specialists to estimate the fair value of these loans' underlying collateral that the issuer used to determine whether these discounts were acceptable. The firm's approach for substantively testing the fair value of the underlying collateral was to test the issuer's process. The firm did not perform procedures to evaluate the reasonableness of the significant assumptions the company's specialists used to develop the collateral values beyond inquiring of management and reading information prepared by the company's specialists. Further the firm did not perform procedures with respect to its use of the work of the company's specialists as audit evidence beyond gaining an understanding of the professional qualifications for one of the company's specialists. (AS 1105.A1-.A10; AS 2501.16)

The firm's substantive procedures to test certain revenue included two substantive analytical procedures. The following deficiencies were identified: · For both substantive analytical procedures the firm used certain information obtained from an external source to develop its expectations but did not evaluate the reliability of this information. (AS 2305.16)

The firm's substantive procedures to test certain revenue included two substantive analytical procedures. The following deficiencies were identified: · For one of these substantive analytical procedures the firm developed its expectation based on certain information obtained from another external source but did not evaluate whether this information was sufficiently reliable for purposes of achieving its audit objectives. (AS 2305.16)

For all but one of the issuer's asset groups the firm did not perform any procedures to evaluate certain indicators of potential impairment that existed at year end. (AS 2301.08 and .11; AS 2810.03)

The issuer maintained an ALL related to loans receivable which included a collectively assessed component ('Collective Reserve') and an individually assessed component ('Individual Reserve'). The issuer used various models and assumptions to estimate the ALL. The following deficiencies were identified: - The firm's approach for substantively testing the Collective Reserve was to review and test management's process. The firm did not sufficiently evaluate the reasonableness of the Collective Reserve because the firm did not perform procedures to test certain assumptions the issuer used to determine the reserve including the loss rates and portfolio segmentation. (AS 2501.09 .10 and .11) [This citation refers to AS 2501 Auditing Accounting Estimates which was in effect for this audit. This standard was replaced by AS 2501 Auditing Accounting Estimates Including Fair Value Measurements which became effective for audits of financial statements for fiscal years ending on or after December 15 2020.]

The issuer maintained an ALL related to loans receivable which included a collectively assessed component ('Collective Reserve') and an individually assessed component ('Individual Reserve'). The issuer used various models and assumptions to estimate the ALL. The following deficiencies were identified: - The firm did not perform procedures to test the Individual Reserve beyond recalculating the days past due for each loan in the population determining the aging bucket for the respective loans and re-performing the issuer's calculation of the reserve using the issuer's loan risk level and associated loss rate assumptions. (AS 2501.07) [This citation refers to AS 2501 Auditing Accounting Estimates which was in effect for this audit. This standard was replaced by AS 2501 Auditing Accounting Estimates Including Fair Value Measurements which became effective for audits of financial statements for fiscal years ending on or after December 15 2020.]

The issuer maintained an ALL related to loans receivable which included a collectively assessed component ('Collective Reserve') and an individually assessed component ('Individual Reserve'). The issuer used various models and assumptions to estimate the ALL. The following deficiencies were identified: - The firm did not identify and appropriately address a departure from IFRS related to the issuer's presentation of repayments of loans from customers as cash flows from investing activities in the statement of cash flows rather than cash flows from operating activities in conformity with IAS 7 Statement of Cash Flows. (AS 2810.30 and .31) Unrelated to our review the issuer reevaluated the presentation of cash flows from the repayment of loans from customers in the statement of cash flows 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 issued a special report regarding those adjustments.

The issuer completed a business combination during the year in which it divested a wholly-owned subsidiary and acquired all of the issued and outstanding shares of another company for cash consideration and the issuance of stock in a series of related divestiture and acquisition transactions. The issuer recorded the acquisition as a reverse merger for accounting and financial reporting purposes. The firm did not perform procedures to test the business combination beyond summarizing the terms of the related transactions and evaluating the appropriateness of the issuer's accounting treatment and financial statement presentation. (AS 2301.08)

The issuer completed a business combination during the year in which it divested a wholly-owned subsidiary and acquired all of the issued and outstanding shares of another company for cash consideration and the issuance of stock in a series of related divestiture and acquisition transactions. The issuer recorded the acquisition as a reverse merger for accounting and financial reporting purposes. The firm did not identify and appropriately address a departure from IFRS related to the issuer's accounting for and recognition of certain expenses relating to the business combination in conformity with IFRS 3 Business Combinations. (AS 2810.30 and .31) Unrelated to our review the issuer reevaluated its accounting for certain expenses relating to the business combination 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 issued a special report regarding those adjustments.

The firm did not perform any procedures to test the adjustments recorded by the issuer to correct the misstatement to its financial statements related to the business combination. (AS 2301.08)

The firm did not perform any procedures to identify and select journal entries and other adjustments for testing. (AS 2401.58)

The firm's approach for substantively testing the reserve for excess and obsolete inventory was to develop an independent expectation. The firm did not perform any procedures to demonstrate it had a reasonable basis for certain assumptions it developed. (AS 2501.22)

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

The firm did not perform any substantive procedures beyond inquiry to test the reasonableness of an estimate for a significant account. (AS 2501.07) [This citation refers to AS 2501 Auditing Accounting Estimates which was in effect for this audit. This standard was replaced by AS 2501 Auditing Accounting Estimates Including Fair Value Measurements which became effective for audits of financial statements for fiscal years ending on or after December 15 2020.]

The firm did not perform any substantive procedures beyond inquiry to test the valuation of related party transactions. (AS 2410.12)

The issuer engaged an external specialist to determine its enterprise value and used that valuation in its impairment analysis for goodwill. The external specialist used a combination of the income approach and the market approach. The following deficiencies were identified: • The firm did not perform procedures to evaluate the reasonableness of the projected cash flows provided by the issuer used in the income approach beyond obtaining a listing of the issuer's contracts and reviewing a selection of those contracts. (AS 1210.12) [This citation refers to AS 1210 Using the Work of a Specialist which was in effect for this audit. This standard was replaced by AS 1210 Using the Work of an Auditor-Engaged Specialist. In addition AS 1105 Audit Evidence and AS 1201 Supervision of the Audit Engagement which were in effect for this audit were revised to include appendices for auditor's use of the work of a company's specialist and auditor's supervision of the work of an auditor-employed specialist respectively. This replacement and these revisions are effective for audits of financial statements for fiscal years ending on or after December 15 2020.]

The issuer engaged an external specialist to determine its enterprise value and used that valuation in its impairment analysis for goodwill. The external specialist used a combination of the income approach and the market approach. The following deficiencies were identified: • The firm did not perform procedures to evaluate the relevance and reliability of certain information used in the market approach. (AS 2502.31)

The issuer engaged an external specialist to determine its enterprise value and used that valuation in its impairment analysis for goodwill. The external specialist used a combination of the income approach and the market approach. The following deficiencies were identified: • The firm did not perform procedures to evaluate the reasonableness of the discount rate used in the impairment analysis. (AS 2502.26 and .28)

The issuer recognized revenue from contracts based on certain inputs. The firm did not perform any procedures to test the specific inputs used by the issuer in recognizing revenue. (AS 2301.08)

The issuer recognized revenue from contracts based on certain inputs. The firm did not perform sufficient procedures to test certain inputs used by the issuer in recognizing revenue as their procedures were limited to comparing the inputs to system-generated reports without performing procedures to test or identify and test controls over the accuracy of those reports. (AS 1105.10)

The firm's substantive procedures to test certain revenue included selecting a sample of transactions for testing. The firm's sample was too small to provide sufficient appropriate audit evidence because in determining the sample size the firm did not take into account tolerable misstatement the allowable risk of incorrect acceptance and the characteristics of the population. (AS 2315.16 .23 and .23A)

The firm identified fraud criteria for journal entries and obtained a listing of 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 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 journal entries without having an appropriate rationale. (AS 2401.61)

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 journal entries without having an appropriate rationale. (AS 2401.61)

The firm did not sufficiently evaluate whether the issuer recognized revenue in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers because it limited its procedures to verifying that the issuer received cash or that cash received agreed to a sales contract. (AS 2810.30)

The firm did not evaluate the issuer's equity classification of and accounting for warrants issued with certain convertible notes payable including whether the warrants should have been classified and accounted for as (i) derivative liabilities in conformity with FASB ASC Topic 815 Derivatives and Hedging or (ii) liabilities in conformity with FASB ASC Topic 480 Distinguishing Liabilities from Equity. (AS 2810.30)