Explorer

In addition the firm did not evaluate the issuer's classification of and accounting for embedded conversion options within certain convertible notes payable including whether the conversion options should have been classified and accounted for as (i) derivatives and recorded at fair value in conformity with FASB ASC Subtopic 815-15 Derivatives and Hedging— Embedded Derivatives or (ii) beneficial conversion features and recorded at intrinsic value in conformity with FASB ASC Subtopic 470-20 Debt —Debt with Conversion and Other Options. (AS 2810.30)

The firm scanned the general ledger but did not identify and test any journal entries and other adjustments. (AS 2401.58)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. To test revenue the firm selected revenue transactions that exceeded a monetary threshold. The following deficiency was identified: · For the selected transactions the firm did not perform any substantive procedures to test whether the issuer's performance obligations had been satisfied when revenue was recognized. (AS 2301.08 and .13)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. To test convertible debt the firm's substantive procedures included confirmation of the balances. The following deficiency was identified: · The firm received electronic responses to certain confirmation requests. The firm did not consider performing procedures to address the risks associated with electronic responses such as verifying the source and contents of the confirmation responses. (AS 2310.29)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. To test convertible debt the firm's substantive procedures included confirmation of the balances. The following deficiency was identified: · For certain of the confirmation requests that were not returned the firm did not perform alternative procedures that provided sufficient appropriate audit evidence that the recorded amounts of the convertible debt were accurate as of the confirmation date. (AS 2310.31)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. To test convertible debt the firm's substantive procedures included confirmation of the balances. The following deficiency was identified: · For certain other confirmation requests that were not returned the firm did not perform alternative procedures. (AS 2310.31)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. The issuer reported derivative liabilities at fair value. The firm's approach for testing the fair value of the derivative liabilities was to test the issuer's process. The following deficiency was identified: · The firm did not evaluate whether the model the issuer used to develop the fair value was in conformity with the applicable financial reporting framework and appropriate for the nature of the related account. (AS 2501.10)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. The issuer reported derivative liabilities at fair value. The firm's approach for testing the fair value of the derivative liabilities was to test the issuer's process. The following deficiency was identified: · The firm did not perform any substantive procedures to evaluate the reasonableness of a significant assumption developed by the issuer. (AS 2501.16)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. 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 substantive procedures to test those journal entries because it limited its procedures to certain journal entries without having an appropriate rationale for limiting its testing to those journal entries. (AS 2401.61)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. To test revenue the firm selected revenue transactions that exceeded a monetary threshold. The following deficiency was identified: · The firm did not perform any procedures to test the remaining revenue transactions. (AS 1105.27; AS 2301.08 and .13)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. The firm did not identify and evaluate departures from GAAP related to the issuer's omission of certain disclosures related to revenue that were required by FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2810.30 and .31)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. The issuer issued convertible debt during the current and prior years. The following deficiency was identified: · The firm did not perform any procedures to evaluate the issuer's equity classification of and accounting for (1) warrants and (2) embedded conversion options associated with certain convertible debt. (AS 2301.08 and .11)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. The issuer issued convertible debt during the current and prior years. The following deficiency was identified: · The firm did not perform any procedures to test the intrinsic value of the beneficial conversion feature associated with certain convertible debt at the date of issuance. (AS 2301.08 and .11)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. The issuer issued convertible debt during the current and prior years. The following deficiency was identified: · The firm did not perform any procedures to test the amortization of debt discount associated with certain convertible debt. (AS 2301.08 and .11)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. The issuer issued convertible debt during the current and prior years. The following deficiency was identified: · The firm did not identify and evaluate errors related to convertible debt in the issuer's consolidated statement of shareholders' deficit and consolidated statement of cash flows. (AS 2810.30 and .31)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. The issuer issued convertible debt during the current and prior years. The following deficiency was identified: · The firm did not identify and evaluate errors in the issuer's convertible debt disclosures. (AS 2810.30 and .31)

The firm's internal inspection program inspected this audit and reviewed certain of these areas but did not identify the deficiencies below. To test convertible debt the firm's substantive procedures included confirmation of the balances. The following deficiency was identified: · The issuer sent the confirmation requests on behalf of the firm. The firm did not maintain control of the confirmation requests through direct communication with the intended recipients of the confirmation requests. (AS 2310.28)

Deficiencies performing substantive procedures over selected revenue transactions and the remaining population.

Deficiencies evaluating classification of convertible debt and warrants and confirming related balances.

Deficiencies testing valuation of derivative liabilities and evaluating a related disclosure departure.

The firm selected an investment security for testing the fair value of certain investment securities. The firm did not perform any procedures to test the fair value of the remaining population of these investment securities. (AS 1105.27; AS 2501.07)

The issuer originated and serviced commercial mortgage loans and funded these mortgage loans by securitizing them directly in the capital markets through the issuance of MSNs which were secured by these same mortgages. The firm did not identify or appropriately address departures from GAAP related to the omission of certain disclosures pertaining to mortgages owned and MSNs as required by FASB ASC Topic 310 Receivables and FASB ASC Topic 942 Financial Services — Depository and Lending related to accounting policies credit quality information and terms and conditions of the MSN agreements. (AS 2810.30 and 31)

The issuer originated and serviced commercial mortgage loans and funded these mortgage loans by securitizing them directly in the capital markets through the issuance of MSNs which were secured by these same mortgages. The issuer recorded the mortgages owned and MSNs on its balance sheet as if the transactions had been accounted for as secured borrowings but recognized direct origination fees immediately upon loan funding and recorded a MSR as if the transactions had been accounted for as sales. The firm did not identify and evaluate the effect on the issuer's financial statements of a GAAP departure related to the issuer's accounting treatment of these transactions. Specifically the firm did not evaluate whether the issuer's securitization of its mortgages owned through the issuance of MSNs met the conditions to be accounted for as a sale or as a secured borrowing in conformity with FASB ASC Topic 860 Transfers and Servicing. (AS 2810.30)

The issuer originated and serviced commercial mortgage loans and funded these mortgage loans by securitizing them directly in the capital markets through the issuance of MSNs which were secured by these same mortgages. The issuer recorded the mortgages owned and MSNs on its balance sheet as if the transactions had been accounted for as secured borrowings but recognized direct origination fees immediately upon loan funding and recorded a MSR as if the transactions had been accounted for as sales. The firm did not evaluate whether the issuer's presentation of interest income earned net of interest expense incurred in its income statement was appropriate. (AS 2810.30 and .31)

During the year under audit the issuer entered into an agreement to sell its servicing fee income to an affiliated entity ('the buyer') for an 18-month period beginning after the end of the year under audit. The issuer's chief executive officer executed the agreement on behalf of (1) the buyer as the trustee of the affiliated entity (2) the issuer as seller and (3) himself as guarantor of the servicing fee income. The firm did not evaluate the business purpose (or lack thereof) of this transaction including whether it may have been entered into to engage in fraudulent financial reporting or conceal misappropriation of assets. (AS 2401.66 .66A and .67)

During the year under audit the issuer entered into an agreement to sell its servicing fee income to an affiliated entity ('the buyer') for an 18-month period beginning after the end of the year under audit. The issuer's chief executive officer executed the agreement on behalf of (1) the buyer as the trustee of the affiliated entity (2) the issuer as seller and (3) himself as guarantor of the servicing fee income. The firm did not evaluate whether the issuer's accounting for and disclosure of the transaction as a sale was appropriate. (AS 2410.11 and .17; AS 2810.30 and .31)

The firm did not identify and evaluate the significance to the issuer's financial statements of a GAAP departure related to the issuer's recognition of the gross proceeds from this transaction as revenue which was not in conformity with FASB ASC Topic 860. (AS 2810.30)

The firm did not sufficiently evaluate a GAAP departure related to the issuer's failure to accrue certain unpaid expenses and related reimbursements receivable at year end in conformity with FASB ASC Topic 946 Financial Services—Investment Companies. Specifically the firm identified multiple unpaid expenses that were not recorded by the issuer at year end. The firm documented that such expenses would be reimbursed and therefore would not impact the issuer's net asset value. The firm did not evaluate the effect of the misstatements in relation to the specific accounts and disclosures involved. (AS 2810.30 and .31)

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 performed an assessment of certain assets for possible impairment using forecasted cash flows that assumed significant revenue growth and the firm used an auditor-employed specialist to assist it with testing the issuer's impairment assessment. The auditor-employed specialist's approach consisted of (1) developing expectations of the value-in-use of these assets and (2) evaluating events occurring after the measurement date. The following deficiency was identified: · For one of these expectations the firm did not sufficiently evaluate the work of the auditor-employed specialist and identify that the auditor-employed specialist's work did not provide sufficient appropriate audit evidence because the auditor-employed specialist did not perform procedures to demonstrate it had a reasonable basis for a significant assumption it used to develop the expectation. (AS 1201.C6 and .C7; AS 2501.22)

The issuer performed an assessment of certain assets for possible impairment using forecasted cash flows that assumed significant revenue growth and the firm used an auditor-employed specialist to assist it with testing the issuer's impairment assessment. The auditor-employed specialist's approach consisted of (1) developing expectations of the value-in-use of these assets and (2) evaluating events occurring after the measurement date. The following deficiency was identified: · For the other expectation the firm did not sufficiently evaluate the work of the auditor-employed specialist and identify that the auditor-employed specialist's conclusion appeared to contradict the issuer's assertion that these assets were not impaired and perform additional procedures or request the auditor-employed specialist to perform additional procedures to address the issue. (AS 1201.C7)

The issuer performed an assessment of certain assets for possible impairment using forecasted cash flows that assumed significant revenue growth and the firm used an auditor-employed specialist to assist it with testing the issuer's impairment assessment. The auditor-employed specialist's approach consisted of (1) developing expectations of the value-in-use of these assets and (2) evaluating events occurring after the measurement date. The following deficiency was identified: · The firm did not sufficiently evaluate the work of the auditor-employed specialist and identify that the auditor-employed specialist's evaluation of events occurring after the measurement date did not provide sufficient appropriate audit evidence because it did not take into account certain changes in the issuer's circumstances and other relevant conditions during the evaluation period. (AS 1201.C6 and .C7; AS 2501.28 and .29)

During the year the issuer capitalized costs associated with certain of these assets. The firm did not perform procedures to evaluate whether in conformity with relevant GAAP the issuer met certain criteria necessary to capitalize these costs beyond inquiry of management and a review of the issuer's internal plans. (AS 2301.08 and .11)

The firm did not perform sufficient procedures to evaluate whether the issuer's recognition of certain revenue was in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers because the firm did not evaluate certain requirements of FASB ASC Topic 606. (AS 2301.08)

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

The firm did not perform procedures to test a significant estimate beyond inquiry including consideration of certain contrary evidence. (AS 2501.07; AS 2810.03)

The issuer's revenue included revenue recognized from contracts over time based on hours incurred to date relative to total estimated hours to complete. The following deficiency was identified: · The firm selected for testing controls that included the review of revenue. The firm did not evaluate the specific review procedures performed by the control owners to assess (i) that revenue was recognized in the appropriate period and (ii) the reasonableness of estimated hours to complete. (AS 2201.42 and .44)

The firm did not identify and test any controls over the existence and completeness of accounts receivable. (AS 2201.39)

The firm selected for testing two controls over the review of the allowance for doubtful accounts. The firm did not identify and test controls over the accuracy and completeness of the accounts receivable aging used in the operation of these two controls beyond identifying and testing a control over the accurate aging of outstanding invoices. (AS 2201.39)

The firm selected for testing two controls over the review of the allowance for doubtful accounts. With respect to the control over the accurate aging of outstanding invoices the firm did not directly test this control because its procedures were substantive in nature. (AS 2201.42 .44 and .B9)

The firm sent positive confirmation requests to test accounts receivable. For certain positive confirmation requests for which it did not receive a response the firm did not perform alternative procedures that provided sufficient appropriate audit evidence to address the existence and accuracy of the accounts receivable. (AS 2310.31)

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

The firm did not perform procedures to test that the issuer satisfied its performance obligations prior to the recognition of revenue beyond obtaining an issuer-produced report and issuer-produced data. (AS 2301.08 and .13)

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

The issuer's revenue included revenue recognized from contracts over time based on hours incurred to date relative to total estimated hours to complete. The following deficiency was identified: · The firm selected for testing a control over the review of hours incurred. 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's revenue included revenue recognized from contracts over time based on hours incurred to date relative to total estimated hours to complete. The following deficiency was identified: · The firm did not identify and test any controls over the accuracy and completeness of certain issuer-produced information used in the operation of the above controls. (AS 2201.39)

The issuer's revenue included revenue recognized from contracts over time based on hours incurred to date relative to total estimated hours to complete. The following deficiency was identified: · The firm did not identify and test any controls over the identification of performance obligations in contracts determination of the transaction price and allocation of the transaction price to the identified performance obligations. (AS 2201.39)

The issuer's revenue included revenue recognized from contracts over time based on hours incurred to date relative to total estimated hours to complete. The following deficiency was identified: · The firm selected for testing two controls that included the review of the presentation and disclosure of the financial statements. The firm did not evaluate the specific review procedures performed by the control owners to evaluate the reasonableness of a disclosure related to revenue. (AS 2201.42 and .44)

The issuer's revenue included revenue recognized from contracts over time based on hours incurred to date relative to total estimated hours to complete. The following deficiency was identified: · The firm did not test or (as discussed above) test controls over the accuracy and completeness of issuer-produced information used in its substantive testing. (AS 1105.10)

The issuer's revenue included revenue recognized from contracts over time based on hours incurred to date relative to total estimated hours to complete. The following deficiency was identified: · The firm did not perform procedures to test or identify and test controls over the accuracy and completeness of certain other issuer-produced information used in its substantive testing. (AS 1105.10)