Explorer

During the audit the firm did not identify and evaluate the significance to the financial statements that the issuer's presentation and disclosure of certain expenses was not in conformity with FASB ASC Topic 330 Inventory. (AS 2810.30 and .31)

During the audit the firm did not identify and evaluate the significance to the financial statements of omissions from the statement of stockholders' equity and other required disclosures under FASB ASC Topic 718 Compensation-Stock Compensation and FASB ASC Topic 260 Earnings Per Share. (AS 2810.30 and .31)

The firm's substantive procedures at year end to test the unit cost of this inventory included selecting a sample of inventory items for testing. The following deficiencies were identified: · The firm did not test whether the issuer's inventory system calculated the inventory unit costs appropriately. (AS 2301.08)

The issuer recognized certain revenue over time based on estimates of the goods and services it would provide to customers and the payments it would receive for those goods and services. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of the reasonableness of the forecasted information that the issuer used to develop these estimates. The firm did not identify and test any controls over the accuracy of the data that were used to develop this forecasted information. (AS 2201.39)

The issuer recognized certain revenue over time based on estimates of the goods and services it would provide to customers and the payments it would receive for those goods and services. The following deficiencies were identified: · The sample size the firm used in certain of its substantive procedures to test this revenue 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 deficiency in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The issuer recognized certain revenue over time based on estimates of the goods and services it would provide to customers and the payments it would receive for those goods and services. The following deficiencies were identified: · The firm's substantive procedures to test this revenue consisted of performing tests of details and substantive analytical procedures. The firm used certain system-generated data in its substantive testing of this revenue but did not test or in the alternative test any controls over the accuracy of these data. (AS 1105.10; AS 2305.16)

The issuer recognized certain revenue over time based on estimates of the goods and services it would provide to customers and the payments it would receive for those goods and services. The following deficiencies were identified: · To facilitate the issuer's fulfillment of its contracts for certain of this revenue the issuer's customers contributed certain goods and services that the issuer recognized as revenue. The firm did not perform sufficient substantive procedures to evaluate whether this revenue was recognized in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers because it did not evaluate certain contractual terms and conditions that could affect revenue recognition. (AS 2810.30)

The issuer held investments without readily determinable fair values that were recorded at cost less impairments. The following deficiencies were identified: · For one of these investments selected for testing the firm did not perform sufficient procedures to evaluate whether management considered certain relevant information in determining whether factors may have existed that indicated an impairment loss was present because the firm's procedures were limited to reading certain meeting minutes and related documents which did not address the relevant information. (AS 2503.48)

The issuer held investments without readily determinable fair values that were recorded at cost less impairments. The following deficiencies were identified: · For another of these investments selected for testing the issuer identified factors that may have indicated an impairment loss was present but concluded that the investment was not impaired based on a sensitivity analysis it prepared for certain of these factors. The firm did not perform any procedures to test this sensitivity analysis and evaluate the other potential impairment factors that were identified by the issuer. (AS 2503.48)

The firm's substantive procedures to test certain operating expenses included performing substantive analytical procedures. The following deficiencies were identified: · For certain types of operating 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 certain of these differences beyond inquiring of management. (AS 2305.13 .14 and .21)

The firm's substantive procedures to test certain operating expenses included performing substantive analytical procedures. The following deficiencies were identified: · For certain other types of operating expenses the expectations the firm used were not sufficiently precise because its expectations were that these expenses would decrease but it did not quantify the amount of the decrease. (AS 2305.17)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling price. The issuer disclosed that it used observable prices to determine the standalone selling prices for certain performance obligations in these arrangements. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of certain standalone selling prices. The firm did not evaluate the specific review procedures that the control owner performed to conclude that the prices the issuer used to determine the standalone selling prices for these performance obligations were observable. (AS 2201.42 and .44)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling price. The issuer disclosed that it used observable prices to determine the standalone selling prices for certain performance obligations in these arrangements. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of certain standalone selling prices. The firm did not identify and test any controls over the accuracy and completeness of certain reports that the control owner used in the operation of this control. (AS 2201.39)

The firm's substantive procedures at year end to test the unit cost of this inventory included selecting a sample of inventory items for testing. The following deficiencies were identified: · The firm did not perform sufficient procedures to test the cost of the raw materials included in the selected items because its procedures were limited to comparing certain of these costs to system-generated reports. (AS 2301.08)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling price. The issuer disclosed that it used observable prices to determine the standalone selling prices for certain performance obligations in these arrangements. The following deficiencies were identified: · The firm did not identify and test any controls that addressed the establishment of the standalone selling price for new products. (AS 2201.39)

Certain of the issuer's revenue arrangements included multiple performance obligations. The issuer allocated the total transaction price for each of these arrangements to the separate performance obligations based on the relative standalone selling price. The issuer disclosed that it used observable prices to determine the standalone selling prices for certain performance obligations in these arrangements. The following deficiencies were identified: · The firm did not perform substantive procedures to evaluate the issuer's determination and disclosure of whether it used observable prices to determine the standalone selling prices for these performance obligations in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2810.30 and .31)

The firm did not identify and test any controls that addressed the risk that certain cash receipts from revenue transactions were not properly recorded to support that these revenue transactions were valid. (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 selected for testing controls that included the issuer's review of the calculation of an accrued expense. The firm did not identify and test any controls over the accuracy of certain data used in this calculation. (AS 2201.39)

The firm's approach for substantively testing the fair values of certain assets was to test the issuer's process and the firm used an auditor-employed specialist to evaluate certain significant assumptions the issuer used to determine these fair values. The firm did not sufficiently evaluate the reasonableness of these significant assumptions because it did not identify that the specialist's procedures were limited to reading an issuer-prepared analysis and obtaining data from external sources that indicated a range of possible assumptions without evaluating whether the issuer had a reasonable basis for its selection of assumptions. (AS 1201.C6 and .C7; AS 2501.16)

The firm relied on controls it selected for testing in its approach to testing certain loans receivable. The following deficiencies were identified: · The firm did not test any controls over the entry of loan information and the recording of payments for these loans in the issuer's loan system. (AS 2301.16)

The firm relied on controls it selected for testing in its approach to testing certain loans receivable. The following deficiencies were identified: · The sample size the firm used in its substantive procedures to test these loans receivable 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's substantive procedures to test one type of revenue consisted of testing a sample of revenue transactions. For certain items in its sample the firm did not perform procedures to evaluate whether the issuer met certain revenue recognition criteria. (AS 2301.08)

The firm did not identify and evaluate the significance to the financial statements of the issuer's omission of a required disclosure under FASB ASC Topic 470 Debt. (AS 2810.30 and .31)

The firm's substantive procedures at year end to test the unit cost of this inventory included selecting a sample of inventory items for testing. The following deficiencies were identified: · The firm did not perform sufficient procedures to test the labor and overhead costs included in the selected items because it did not test whether these costs were consistent with the standard labor and overhead rates that the issuer had determined. (AS 2301.08)

The firm did not obtain sufficient appropriate audit evidence that certain cash accounts included in the issuer's cash balance were owned and controlled by the issuer. Although these accounts were in the name of a related party the firm limited its procedures to inspecting a legal letter for one of these cash accounts which the issuer had obtained from the related party during a previous audit. (AS 2301.08)

The firm did not obtain sufficient appropriate audit evidence that certain cash accounts included in the issuer's cash balance were owned and controlled by the issuer. The firm did not evaluate whether these cash accounts should have been included in the issuer's related party disclosures. (AS 2410.17)

The firm's substantive procedures to test certain expenses included performing substantive analytical procedures. For certain of these analytical procedures the firm did not determine whether the expectations it used were based on predictable relationships. (AS 2305.13 and .14)

The firm's substantive procedures to test certain expenses included performing substantive analytical procedures. For each of these analytical procedures the firm identified differences in excess of the firm's established threshold but did not evaluate the differences beyond inquiring of management and in one instance obtaining certain pricing trends. (AS 2305.21)

The firm selected for testing a control that consisted of the issuer's review of certain assumptions used to estimate the quantitative component of the ACL for loans collectively evaluated for impairment. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of these assumptions that were outside of the range of assumptions the issuer established under its ACL methodology. (AS 2201.42 and .44)

The issuer used certain long-lived assets to generate revenue. The firm used information produced by the issuer in its testing of the obsolescence reserve for these assets but did not perform any substantive procedures to test or in the alternative test any controls over the accuracy and completeness of certain of this information. (AS 1105.10)

The firm sent positive confirmation requests to the issuer's customers for a sample of deposit liabilities. The firm did not perform sufficient sampling procedures because it did not verify that all deposit liabilities had the opportunity to be selected for testing. (AS 2315.24)

The issuer used an information-technology system to process transactions related to accounts payable at certain of the issuer's business units. The following deficiencies were identified: · The firm selected for testing a control over the daily transfer of data from the accounts payable system to the general ledger including the manual resolution of any errors in this data transfer. In its testing of the operating effectiveness of this control the firm did not test how the control owner resolved these data transfer errors beyond inquiring of management. (AS 2201.44)

The issuer used an information-technology system to process transactions related to accounts payable at certain of the issuer's business units. The following deficiencies were identified: · The firm selected for testing a control that included the automated processing of invoices by the accounts payable system. The firm did not identify and test any controls over the investigation and resolution of exceptions identified during this automated processing. (AS 2201.39)

The issuer used an information-technology system to process transactions related to accounts payable at certain of the issuer's business units. The following deficiencies were identified: · The firm selected for testing a control that included the automated processing of invoices by the accounts payable system. The firm did not test the aspect of this control related to the processing of these exceptions once they were resolved. (AS 2201.42 and .44)

With respect to accounts payable at certain other business units (“other accounts payable”) the following deficiencies were identified: · The firm did not evaluate whether the risks of material misstatement that the firm associated with accounts payable at business units that were subject to more extensive audit procedures also applied to these other accounts payable. (AS 2101.11 and .12; AS 2201.B10)

For one contractual arrangement the firm did not sufficiently evaluate whether the issuer's accounting for certain payments to a customer as expenses was in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers because it did not evaluate whether these payments included variable consideration. (AS 2301.08) In connection with our review the issuer reevaluated its accounting for these arrangements and concluded that 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.

With respect to user access: · The firm selected for testing certain controls over the restriction of access to these IT systems. In its testing of the operating effectiveness of one of these controls the firm did not evaluate whether access was appropriately restricted beyond inquiring of management. (AS 2201.42 and .44)

The firm used system-generated data and reports in its testing of revenue. The following deficiencies were identified: · The firm did not perform any procedures to test or test any controls over the accuracy and/or completeness of one of these reports and certain other system-generated data certain of which the firm used in developing its expectations for substantive analytical procedures beyond observing the issuer generate this report. (AS 1105.10; AS 2305.16)

The issuer's contractual arrangements offered certain discounts primarily consisting of rebates and other deductions. For one type of revenue the issuer recorded these discounts as an expense. The firm did not evaluate whether the issuer's accounting for these discounts was in conformity with FASB ASC Topic 606. (AS 2301.08)

The issuer performed a quantitative assessment of the possible impairment of goodwill. To determine the fair value of the reporting unit the issuer developed cash-flow forecasts using various significant assumptions. The following deficiencies were identified: · The firm did not evaluate the relevance and reliability of certain industry information it used in evaluating the reasonableness of certain significant assumptions. (AS 1105.04 and 06)

The issuer performed a quantitative assessment of the possible impairment of goodwill. To determine the fair value of the reporting unit the issuer developed cash-flow forecasts using various significant assumptions. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of the significant assumptions related to revenue growth rates because it did not evaluate significant differences between these assumptions and industry information and historical experience. (AS 2501.16)

The issuer performed a quantitative assessment of the possible impairment of goodwill. To determine the fair value of the reporting unit the issuer developed cash-flow forecasts using various significant assumptions. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of certain other significant assumptions because it did not take into account (1) certain contractual restrictions or (2) the issuer's written plans or other relevant documentation that could affect the issuer's ability to carry out its planned actions. (AS 2501.16 and .17)

The firm identified a control deficiency related to the issuer's review of changes to prices maintained in the issuer's general ledger. The firm identified and tested various controls that it believed would mitigate this deficiency. The firm did not identify that these compensating controls did not address the risk of material misstatement related to inaccurate price changes. (AS 2201.68)

For one type of revenue the firm did not identify and test any controls that addressed the risk related to the completeness and accuracy of data transferred from the issuer's revenue system to the general ledger. (AS 2201.39)

The firm did not identify and test any controls that addressed the issuer's presentation of deferred revenue. (AS 2201.39)

The firm did not identify and evaluate that the issuer's presentation of certain deferred revenue was not in conformity with FASB ASC Topic 210 Balance Sheet. (AS 2810.30 and .31)

The issuer recognized revenue from two of its business units based in part on labor hours recorded in a timekeeping system hosted by a service organization. The following deficiencies were identified: · The firm was unable to obtain a service auditor's report regarding the effectiveness of the service organization's controls for the year under audit. The firm identified and tested various compensating controls that it believed would mitigate its inability to obtain a service auditor's report. The firm did not identify that the control owners used labor hours in the performance of these compensating controls that were obtained from this timekeeping system. (AS 2201.68)

With respect to user access: · The firm selected for testing a control over the issuer's review of requested user access to these IT systems. In its testing of the operating effectiveness of this control the firm excluded a certain type of user from its testing population and instead replaced one of the users selected with one of the excluded type of users. (AS 2201.44)

The issuer recognized revenue from two of its business units based in part on labor hours recorded in a timekeeping system hosted by a service organization. The following deficiencies were identified: · The firm used labor hours from this timekeeping system in its testing of this revenue and related accounts. The firm did not perform any procedures to test or sufficiently test controls over the accuracy and completeness of these labor hours. (AS 1105.10)