Explorer

The firm did not identify and evaluate the significance to the financial statements of omissions from a required disclosure under FASB ASC Topic 805 Business Combinations. (AS 2810.30 and .31)

The firm selected for testing a control that included monthly reviews of certain revenue for four of the issuer's business units. 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 used multiple IT systems to initiate process and record transactions related to certain revenue at two of these business units. The firm tested controls over user access to these systems. The following deficiencies were identified: · The firm selected for testing a control over the granting or modification of user access. For the first business unit the firm did not test the operating effectiveness of this control. For the second the firm did not test the design and operating effectiveness of the aspect of this control related to the modification of user access. (AS 2201.42 and .44)

The issuer used multiple IT systems to initiate process and record transactions related to certain revenue at two of these business units. The firm tested controls over user access to these systems. The following deficiencies were identified: · The firm selected for testing a control over the periodic review of user access. For both business units the firm did not identify and test any controls over the accuracy and completeness of the user access lists that the control owner used in the operation of this control. (AS 2201.39)

The issuer used multiple IT systems to initiate process and record transactions related to certain revenue at two of these business units. The firm tested controls over user access to these systems. The following deficiencies were identified: · As a result of these deficiencies the firm's testing of the accuracy and completeness of data used in the performance of the monthly financial information review control discussed above for these two business units was not sufficient. (AS 2201.46)

The sample sizes the firm used in certain of its substantive procedures to test this revenue at three of these business units 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)

With respect to user access: · The firm selected for testing a control over the approval of new or modified user access for each of these IT systems. The firm did not test the operating effectiveness of (1) this control for one of these systems and (2) the aspect of this control related to the modification of access for existing users for certain other of these systems. Further in its testing of the operating effectiveness of this control for certain IT systems the firm tested fewer items than the sample size it calculated. (AS 2201.44)

For certain revenue transactions that occurred throughout the audit period the firm did not identify and test any controls that addressed the risk related to the accuracy of prices and quantities invoiced. (AS 2201.39)

The sample sizes the firm used in certain of its substantive procedures to test this 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 deficiency in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm's substantive procedures to test certain revenue consisted of (1) testing a sample of revenue transactions and (2) performing analytical procedures. The following deficiencies were identified: · For certain of the transactions selected for testing the firm did not test whether revenue was recognized according to the contractual terms. (AS 2301.08)

The firm's substantive procedures to test certain revenue consisted of (1) testing a sample of revenue transactions and (2) performing analytical procedures. The following deficiencies were identified: · The firm's analytical procedures consisted of calculating the issuer's gross margin. These procedures did not provide sufficient appropriate audit evidence because the firm did not (1) develop an expectation and (2) establish a threshold for investigation of differences from the expectation. (AS 2305.17 and .20)

The firm did not identify and test any controls over the accuracy of prices and quantities invoiced. (AS 2201.39)

The sample sizes the firm used in certain of its substantive procedures to test revenue and accounts receivable 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 deficiency 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 the issuer's performance of a physical inventory count at each location at an interim date and the issuer's roll-forward of these inventory counts to year end. The firm did not perform any procedures to test the aspect of this control related to the issuer's roll-forward procedures. (AS 2201.42 and .44)

The firm selected for testing a control over the review of the issuer's income tax provision. In its testing of the operating effectiveness of this control the firm did not evaluate whether an item identified by the control owner for follow up was appropriately resolved. (AS 2201.44)

The firm did not perform any substantive procedures to test or in the alternative test any controls over the accuracy and/or completeness of certain data the firm used in its substantive testing of income taxes. (AS 1105.10)

The firm did not identify and evaluate the significance to the financial statements of a misstatement in a required disclosure under FASB ASC Topic 740 Income Taxes. (AS 2810.30 and .31)

With respect to user access: · The firm selected for testing a control over the removal of access for terminated employees. For one of these IT systems the firm did not evaluate the control owner's procedures to determine whether access was appropriately removed for users identified as terminated. (AS 2201.42 and .44)

The firm performed substantive analytical procedures to test certain expenses. The firm did not determine whether the expectations it used in these analytical procedures were based on predictable relationships. Further the firm identified differences in excess of the firm's established threshold but did not evaluate these differences beyond inquiring of management. (AS 2305.13 .14 and .21)

The firm's approach for substantively testing the estimated future benefit of certain deferred tax assets was to review and test management's process. The issuer used forecasts to determine this estimate. The firm did not sufficiently evaluate the reasonableness of this estimate because the firm's procedures to test certain assumptions underlying these forecasts were limited to inquiring of management and performing a sensitivity analysis that indicated that if certain alternative assumptions were used the future benefit would change by a significant amount. Further the firm did not perform any procedures to test the accuracy and completeness of certain data the issuer used in these forecasts. (AS 1105.10; AS 2501.09 .10 and .11)

The firm selected for testing a control that included the issuer's review of the reasonableness of the revenue-growth assumptions used in the valuation of certain assets acquired and liabilities assumed. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of the revenue-growth assumptions. (AS 2201.42 and .44)

The firm did not identify and evaluate the significance to the financial statements of omissions from a required disclosure under FASB ASC Topic 805 Business Combinations. (AS 2810.30 and .31)

During the audit the firm did not identify and evaluate the significance to the financial statements of misstatements in a required disclosure under FASB ASC Topic 280 Segment Reporting. (AS 2810.30 and .31)

The firm selected for testing a control that consisted of the issuer's review of the assigned loan risk ratings. The loan risk rating was an important input in estimating the ALL and determining whether a loan would be individually or collectively evaluated for impairment. 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 a control over the review of the valuation of assets acquired and liabilities assumed in a business combination. The firm did not evaluate the specific review procedures that the control owner performed to assess the accuracy of the inventory information used to determine the valuation of the inventory acquired. (AS 2201.42 and .44)

During the audit the firm did not identify and evaluate the significance to the financial statements of misstatements related to lease expense information included in a required disclosure under FASB ASC Topic 842 Leases. (AS 2810.30 and .31)

With respect to both user access and change management: · For certain IT systems the firm did not (1) identify and test controls and/or (2) test identified controls that addressed certain risks over change management and user access. (AS 2201.39)

With respect to both user access and change management: · For one of these IT systems the firm selected for testing controls related to (1) the monitoring of database changes and (2) privileged access review but did not perform any procedures beyond inquiry to test the design and operating effectiveness of these controls. (AS 2201.42 and .44)

With respect to both user access and change management: · For each of these IT systems the firm did not perform any substantive procedures to test or in the alternative test any controls over the completeness of certain system-generated reports that it used to make its selections for testing controls over change management and/or user access. (AS 1105.10)

As a result of the audit deficiencies discussed above the firm did not perform sufficient substantive procedures to test or sufficiently test controls over (1) the completeness of certain system-generated reports that the firm used to make its selections to test various controls over certain revenue and related accounts and (2) the accuracy of certain system-generated data it used in its substantive testing of certain revenue and related accounts. (AS 1105.10)

The firm did not identify and test any controls that addressed whether the issuer's inventory system appropriately calculated the unit costs used to record certain manufactured inventory. (AS 2201.39)

With respect to accounts payable at certain other business units (“other accounts payable”) the following deficiencies were identified: · The firm did not identify and test any controls over these other accounts payable. (AS 2201.39)

With respect to accounts payable at certain other business units (“other accounts payable”) the following deficiencies were identified: · The firm did not perform any substantive procedures to test these other accounts payable. (AS 2301.08)

The firm did not identify and test any controls over the accuracy and completeness of the customer order information from various source systems that the issuer used to record revenue. (AS 2201.39)

The firm selected for testing two controls that consisted of the issuer's reviews of revenue transactions for appropriate revenue recognition. For the first control the firm did not test whether the control addressed all revenue transactions. For the second control the firm did not evaluate whether the issuer's review was sufficient to address the risks of material misstatement given not all revenue transactions were covered by this control. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the issuer's reviews of comparisons of current-period revenue to prior-period revenue. The firm did not identify and test any controls over the accuracy of certain revenue data used in the operation of this control. (AS 2201.39)

The firm's substantive procedures to test certain of this revenue consisted of (1) testing a sample of revenue transactions (2) testing a sample of accounts receivable and (3) performing analytical procedures. The following deficiencies were identified: · For certain of the transactions selected for testing which included multiple services provided to the customer the firm did not evaluate whether multiple performance obligations existed in the associated contract that would affect whether this revenue was appropriately recognized. (AS 2301.08)

The firm's substantive procedures to test certain of this revenue consisted of (1) testing a sample of revenue transactions (2) testing a sample of accounts receivable and (3) performing analytical procedures. The following deficiencies were identified: · The firm determined its sample size for testing these revenue transactions based in part on the assurance it had obtained from its testing of a sample of accounts receivable at year end. This year-end accounts receivable testing did not provide the planned level of substantive evidence to address the risks of material misstatement related to this revenue because this procedure was primarily focused on the occurrence of revenue at a point in time. As a result the sample that the firm used to test this revenue was too small to provide sufficient appropriate audit evidence to address the risks of material misstatement related to this revenue throughout the year. (AS 2301.42; AS 2315.19 .23 and .23A)

The firm's substantive procedures to test certain of this revenue consisted of (1) testing a sample of revenue transactions (2) testing a sample of accounts receivable and (3) performing analytical procedures. The following deficiencies were identified: · For the analytical procedures the firm did not determine whether the expectations it used in these analytical procedures were based on predictable relationships. (AS 2305.13 and.14)

The firm did not identify and test any controls over this expense. (AS 2201.39)

During the audit the firm did not identify and appropriately address that the issuer's accounting for warrants as equity was not in conformity with FASB ASC Topic 815 Derivatives and Hedging. (AS 2810.30) Unrelated to our review the issuer reevaluated its accounting for these warrants 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 sample sizes the firm used in certain of its substantive procedures to test this inventory 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 deficiency in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The issuer offered various forms of sales incentives to customers that were recorded as deductions from revenue. The following deficiencies were identified: · The firm did not perform any substantive procedures to test certain of these sales incentives beyond comparing the recorded balances to system-generated reports. (AS 2301.08)

The issuer offered various forms of sales incentives to customers that were recorded as deductions from revenue. The following deficiencies were identified: · The firm's sample for testing certain other of these sales incentives was too small to provide sufficient appropriate audit evidence because in determining the sample size the firm did not take into account tolerable misstatement and the allowable risk of incorrect acceptance. (AS 2315.16 .23 and .23A)

The firm did not identify and evaluate the significance to the financial statements that the issuer's omission of certain cash from the statement of cash flows was not in conformity with FASB ASC Topic 230 Statement of Cash Flows. (AS 2810.30)

The firm selected for testing controls that consisted of the issuer's reviews of the fair value of certain investments. The firm did not evaluate the specific review procedures that the control owners performed to assess the (1) reasonableness of the methodologies and assumptions the issuer used to determine the fair value of these investments and (2) accuracy and completeness of a report used in the operation of these controls. (AS 2201.42 and .44)

The issuer recognized certain investment income based on estimates derived in part from cash-flow models. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of the assumptions used in these cash-flow models. The firm did not identify and test any controls over the accuracy and completeness of certain data that were used to develop certain of these assumptions. (AS 2201.39)

The issuer recognized certain investment income based on estimates derived in part from cash-flow models. The following deficiencies were identified: · During the year the issuer made changes to certain assumptions used in these cash-flow models. The firm selected for testing a control that consisted of the issuer's reviews of these changes. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of these changes. (AS 2201.42 and .44)

The issuer recognized certain investment income based on estimates derived in part from cash-flow models. The following deficiencies were identified: · The firm did not identify and test any controls over the accuracy and completeness of the output of these cash-flow models that operated during the second half of the year. (AS 2201.39)

The issuer recognized certain investment income based on estimates derived in part from cash-flow models. The following deficiencies were identified: · The firm used the output of these cash-flow models in its substantive testing of this investment income. The firm did not perform any substantive procedures to test or test any controls over the accuracy and completeness of the output of these cash-flow models for the second half of the year. (AS 1105.10)