Explorer

The issuer reported certain investment securities at fair value. The firm did not perform substantive procedures to test the fair value of these investments beyond comparing the recorded fair value to the record keepers' reports and inquiring of the record keepers. (AS 2501.07)

One of the issuer's categories of revenue consisted of transactions with an entity that was indirectly owned by a member of managements immediate family and other unrelated parties. The firm did not perform procedures to evaluate whether the revenue constituted related party transactions and If so were property disclosed in the financial statements. (AS 2410.14-.17; AS 2810.30 and .31)

The firm's approach to testing the fair value of derivatives was to develop an independent eat mate. With respect to its Independent estimate the firm did not (1) evaluate the appropriateness of the model It used given the complexity of the instruments; (2) obtain evidence to establish the reasonableness of the volatility rate used; and (3) evaluate the significant difference between the firm's estimate and the issuer's estimate because the firm's evaluation relied solely on the view that the issuer's estimate was more conservative. (AS 2502.18 and 40)

The firm did not identify and evaluate that the issuer did not present the results of discontinued operations as a separate component of income in the issuer's statements of operations as required by FASB ASC Topic 205 Presentation of Financial Statements. (AS 2810.30 and .31) In connection with our review the issuer reevaluated its accounting for discontinued operations and concluded that material misstatements existed that had not been previously identified. The issuer subsequently corrected these misstatements 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 that the issuer did not present certain assets and liabilities related to discontinued operations as current in the balance sheet after it committed to complete the sale of these assets within the next year as required by FASB ASC Topic 210 Balance Sheet. (AS 2810.30 and .31) In connection with our review the issuer reevaluated its accounting for discontinued operations and concluded that material misstatements existed that had not been previously identified. The issuer subsequently corrected these misstatements in a restatement of its financial statements and the firm revised and reissued its report on the financial statements.

The firm did not perform any procedures to identify and select journal entries and other adjustments for testing to address the potential for material misstatement due to fraud. (AS 2401.58)

To determine whether the intangible asset was impaired the issuer compared the asset's estimated undiscounted cash flows to its carrying value. The estimated cash flows were based on revenue projections that the issuer developed by weighting different categories of customers and estimating the sales price and number of units to be sold for each category. The firm compared the issuer's overall revenue projections and gross margin growth rates to those of several of the issuer's competitors. The firm did not evaluate the reasonableness of assumptions related to the weighting of customer categories and the number of units to be sold. Further the firm did not evaluate the reasonableness of the overall revenue projections and gross margin growth rates considering the decline in those rates for certain of the issuer's competitors. (AS 2501.09 .10 and .11; AS 2810.03)

The firm selected for testing a control that consisted of management's review of the impairment analysis for certain intangible assets. The firm did not evaluate the review procedures that the control owner 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 firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiencies below. The firm did not perform any substantive procedures to evaluate the reliability of information obtained from external sources that it used to test certain revenue and related accounts. (AS 1105.04 and .06)

The firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiencies below. The firm did not perform any procedures to test or test any controls over the accuracy and completeness of a report it used to test certain other revenue and related accounts. (AS 1105.10)

The firm's approach to testing participant distributions included reliance on controls and the use of data and reports from a service organization which processed and recorded participant distributions. The firm did not test the design and operating effectiveness of complementary user controls it selected for testing related to administration of access to electronic records and review of participant data and reports. In addition the firm did not evaluate whether certain other complementary user controls identified in the service auditor's report were relevant in addressing the risks of material misstatement related to participant distributions. (AS 2601.14)

The sample size the firm used in its substantive procedures to test participant distributions 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 testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm used certain electronic participant data provided by the plan sponsor's service organization in testing participant distributions. The firm did not perform any procedures that addressed the accuracy and completeness of this data. (AS 2301.08)

The issuer recognized certain revenue from transactions with related parties. 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 850 Related Party Disclosures related to this revenue. (AS 2810.30 and .31)

The firm sent a positive confirmation request to one of the issuer's customers for total revenue for the year and accounts receivable at year end. The customer did not respond to the aspect of the confirmation request related to revenue. The firm did not perform alternative procedures. (AS 2310.31)

The firm did not perform any substantive procedures to test certain inputs used by the issuer to determine the cost of certain inventory. Further the firm did not perform sufficient substantive procedures to test the allocation of overhead costs to this inventory because it limited its procedures to comparing costs and production to the prior year without performing procedures to determine whether prior year costs and production would be representative of the current year. (AS 2301.08)

For certain other inventory the firm did not perform any substantive procedures to test or in the alternative identify and test any controls over the accuracy and completeness of certain reports that it used in its inventory cost testing. (AS 1105.10)

During the year the issuer identified indicators of possible impairment for certain long-lived assets and engaged a specialist to determine the fair values of these assets. The firm's approach for substantively testing the fair values of these assets was to test the issuer's process. The following deficiencies were identified: - For one asset group the firm did not evaluate whether the significant assumptions developed by the company's specialist were consistent with relevant information. (AS 1105.A8b)

During the year the issuer identified indicators of possible impairment for certain long-lived assets and engaged a specialist to determine the fair values of these assets. The firm's approach for substantively testing the fair values of these assets was to test the issuer's process. The following deficiencies were identified: - For another asset group the firm did not perform any procedures to evaluate the reasonableness of the significant assumptions developed by the company's specialist. (AS 1105.A8b)

During the year the issuer identified indicators of possible impairment for certain long-lived assets and engaged a specialist to determine the fair values of these assets. The firm's approach for substantively testing the fair values of these assets was to test the issuer's process. The following deficiencies were identified: - For both asset groups the firm did not test or in the alternative identify and test controls over the accuracy and completeness of certain issuer-produced data that the company's specialist used. (AS 1105.A8a)

The issuer reported certain cash at year end that included amounts held in banks located in another country that had restrictions on the convertibility and remittance of amounts outside this country. The firm received positive confirmations from financial institutions indicating that certain of these amounts consisted of term deposits with maturities beyond one year. The firm did not perform any procedures to evaluate whether the issuer properly classified these amounts as unrestricted cash and disclosed any restrictions in conformity with International Accounting Standard 7 Statement of Cash Flows. (AS 2810.03 .30 and .31)

The firm's approach for substantively testing the issuer's impairment analysis for certain intangible assets was to develop an independent expectation which included significant assumptions that were developed by the issuer and the firm. The following deficiencies were identified: · The firm did not perform sufficient procedures to evaluate the reasonableness of a certain significant assumption that was developed by the issuer because the firm did not (1) evaluate whether the issuer had a reasonable basis for this assumption and (2) take into account the issuer's intent and ability to carry out this assumption beyond performing inquiries of management and inspecting invoices. (AS 2501.16 and .17)

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 any procedures to test these journal entries. (AS 2401.61)

The issuer engaged a specialist to develop significant inputs used to determine the fair value of certain long-lived assets. The following deficiencies were identified: · The firm did not test the accuracy and completeness of certain company-produced data used by the company's specialist. (AS 1105.A8a)

The issuer engaged a specialist to develop significant inputs used to determine the fair value of certain long-lived assets. The following deficiencies were identified: · The firm did not evaluate the relevance and reliability of certain data from external sources used by the company's specialist. (AS 1105.A8a)

The issuer engaged a specialist to develop significant inputs used to determine the fair value of certain long-lived assets. The following deficiencies were identified: · The firm did not perform any procedures to evaluate the reasonableness of certain significant assumptions developed by the company's specialist and the issuer. (AS 1105.A8b; AS 2501.16)

The issuer engaged a specialist to develop significant inputs used to determine the fair value of certain long-lived assets. The following deficiencies were identified: · The firm did not evaluate whether the methods used by the company's specialist were appropriate under the circumstances taking into account the requirements of IFRS. (AS 1105.A8c)

The firm's approach for substantively testing the issuer's impairment analysis for certain intangible assets was to develop an independent expectation which included significant assumptions that were developed by the issuer and the firm. The following deficiencies were identified: · The firm did not perform any procedures to demonstrate that it had a reasonable basis for a certain significant assumption that was developed by the firm including taking into account the requirements of certain elements of the applicable financial framework. (AS 2501.21 and .22)

The issuer used an information technology (IT) application to process inventory transactions and calculate inventory costs. To reduce the extent of its substantive procedures over the valuation of inventory the firm tested and placed reliance on certain application controls. The following deficiencies were identified: · The firm selected for testing a logical access control over this IT application. The firm did not perform procedures to test the design and operating effectiveness of this control beyond observing the control owner perform a point in time logical access review. (AS 2301.16)

The issuer used an information technology (IT) application to process inventory transactions and calculate inventory costs. To reduce the extent of its substantive procedures over the valuation of inventory the firm tested and placed reliance on certain application controls. The following deficiencies were identified: · The firm selected for testing a logical access control over this IT application. The firm identified a control deficiency in its testing of this control but did not evaluate the severity of this deficiency and its effect on its control risk assessment. (AS 2301.34)

The issuer used an information technology (IT) application to process inventory transactions and calculate inventory costs. To reduce the extent of its substantive procedures over the valuation of inventory the firm tested and placed reliance on certain application controls. The following deficiencies were identified: · The firm did not identify and test any controls related to program changes for this IT system. (AS 2301.16)

The firm did not perform sufficient substantive procedures to test the valuation of inventory as follows: · The sample size the firm used in certain of its substantive procedures to test the valuation of inventory 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 did not perform sufficient substantive procedures to test the valuation of inventory as follows: · The firm did not perform any procedures to test or sufficiently test controls over the accuracy and completeness of certain system-generated data that it used to substantively test the valuation of inventory. (AS 1105.10)

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 other than inquiries of management it limited its procedures to one journal entry without having an appropriate rationale for limiting its testing to that journal entry. (AS 2401.61)

The firm did not perform any procedures to test certain significant assumptions used by the issuer to determine the cost of certain inventory. (AS 2501.16)

The firm selected for testing a control that consisted of a quarterly comparison of a system-generated list of invoices used to recognize revenue to the related shipping documents to determine whether revenue was recorded in the correct period. The firm did not identify and test any controls over the accuracy and completeness of the system-generated list used in the operation of this control. (AS 2201.39)

The firm selected for testing manual journal entries meeting certain fraud criteria. The firm did not perform sufficient procedures to test these journal entries because it did not examine the underlying support for the entries and instead limited its procedures to inquiry of management. (AS 2401.61)

The firm selected for testing a control that consisted of a quarterly comparison of a system-generated list of invoices used to recognize revenue to the related shipping documents to determine whether revenue was recorded in the correct period. The firm's testing of this control did not provide sufficient appropriate audit evidence of the control's operating effectiveness because the firm limited its testing to one invoice from each instance in which the control was selected for testing. (AS 2201.46)

The firm selected for testing controls that consisted of the review and approval of (1) the quantity price and other terms and conditions for each customer order and (2) any changes to customer orders. The firm did not evaluate the specific review procedures that the control owners performed to determine the appropriateness of (1) the price and quantity for each customer order and (2) changes to customer orders. (AS 2201.42 and .44)

The sample sizes the firm used in certain of its substantive procedures to test revenue were 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 management's review of the accounts receivable aging report to determine whether the allowance for doubtful accounts was appropriate. The firm did not identify and test any controls over the accuracy and completeness of the aging report used in the operation of this control. (AS 2201.39)

The firm selected for testing a control that consisted of management's review of the accounts receivable aging report to determine whether the allowance for doubtful accounts was appropriate. The firm did not evaluate the review procedures that the control owner 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 firm selected for testing controls that consisted of management's reviews of system-generated reports used to determine the (1) amount of labor and overhead capitalized into inventory and (2) inventory obsolescence reserve. The firm did not identify and test any controls over the accuracy and completeness of the system-generated reports used in the operation of these controls. (AS 2201.39)

The firm selected for testing controls that consisted of management's reviews of system-generated reports used to determine the (1) amount of labor and overhead capitalized into inventory and (2) inventory obsolescence reserve. 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 firm's approach for substantively testing the amount of labor and overhead costs capitalized into inventory and the slow-moving and obsolete inventory reserve was to review and test management's processes. The firm did not evaluate the reasonableness of the capitalized labor and overhead costs and the slow-moving and obsolete inventory reserve because the firm did not perform procedures to test certain methods and assumptions the issuer used to capitalize such costs and determine the reserve. (AS 2501.09 .10 and .11)

The firm did not identify and appropriately address a departure from GAAP related to the issuer recognizing certain revenue that did not reflect consideration promised in a contract in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2810.30)

For this revenue 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. (AS 2810.30)

For other types of revenue the firm did not sufficiently evaluate whether the revenue was appropriately recognized in conformity with ASC Topic 606 because it limited its procedures to verifying that the issuer received cash for recognized revenue. (AS 2810.30)

The firm did not perform sufficient procedures to test the existence of and the issuer's rights and obligations regarding accounts receivable because it limited its procedures to (1) inquiring of the issuer and (2) inspecting documents prepared by the issuer regarding the amounts recorded for certain accounts receivable. (AS 2301.08)

The firm's approach for substantively testing a significant estimate was to develop an independent expectation of the estimate. The firm did not evaluate the relevance and reliability of data it used to develop its independent estimate. (AS 1105.04 and .06; AS 2501.12)