Explorer

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

The issuer engaged a specialist to perform an assessment of goodwill and certain intangible assets for possible impairment. The following deficiencies were identified: · The firm did not identify and test any controls that addressed the (1) reasonableness of a significant assumption developed by the company's specialist and (2) relevance and reliability of certain external information used by the company's specialist in developing another significant assumption. (AS 2201.39) Unrelated to our review the issuer reevaluated its controls over goodwill and these intangible assets and concluded that a material weakness existed that had not been previously identified. The issuer subsequently reflected this material weakness in a revision to its report on ICFR and the firm revised its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report.

The issuer engaged a specialist to perform an assessment of goodwill and certain intangible assets for possible impairment. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's reviews of certain other significant assumptions developed by the company's specialist or developed by the issuer. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of these significant assumptions. (AS 2201.42 and .44) Unrelated to our review the issuer reevaluated its controls over goodwill and these intangible assets and concluded that a material weakness existed that had not been previously identified. The issuer subsequently reflected this material weakness in a revision to its report on ICFR and the firm revised its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report.

The firm's approach to evaluate these intangible assets for possible impairment was to test the issuer's process. The following deficiencies were identified: · The firm did not evaluate the reasonableness of certain significant assumptions developed by the company's specialist or developed by the issuer. (AS 1105.A8b; AS 2501.16) Unrelated to our review the issuer reevaluated its accounting for these assets and concluded that misstatements existed that had not been previously identified. The issuer corrected these misstatements in a subsequent filing.

The firm's approach to evaluate these intangible assets for possible impairment was to test the issuer's process. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of certain other significant assumptions developed by the company's specialist because it did not evaluate whether these assumptions were consistent with existing market information. (AS 1105.A8b) Unrelated to our review the issuer reevaluated its accounting for these assets and concluded that misstatements existed that had not been previously identified. The issuer corrected these misstatements in a subsequent filing.

The firm's approach to evaluate these intangible assets for possible impairment was to test the issuer's process. The following deficiencies were identified: · The firm did not evaluate the relevance and reliability of certain external information used by the company's specialist in developing another significant assumption. (AS 1105.A8a) Unrelated to our review the issuer reevaluated its accounting for these assets and concluded that misstatements existed that had not been previously identified. The issuer corrected these misstatements in a subsequent filing.

During the year the issuer restructured certain of its debt and recorded an extinguishment loss. The following deficiencies were identified: · The firm did not identify and test any controls that addressed whether the (1) restructured debt and (2) issuer's fair value disclosures for debt were measured in conformity with FASB ASC Topic 820 Fair Value Measurement. (AS 2201.39)

During the year the issuer restructured certain of its debt and recorded an extinguishment loss. The following deficiencies were identified: · The firm's approach to substantively test the fair value of the restructured debt was to develop an independent expectation of the estimate. In developing its expectation the firm did not take into account certain requirements of FASB ASC Topic 820. (AS 2501.21)

During the year the issuer restructured certain of its debt and recorded an extinguishment loss. The following deficiencies were identified: · The firm did not perform any procedures to test the issuer's fair value disclosures for debt. (AS 2501.07)

When testing the sample the firm selected the firm identified misstatements but did not (1) evaluate the nature and cause of the misstatements identified (2) project the misstatements to the remaining population of expenses and (3) evaluate whether the projected misstatements were material to the financial statements. (AS 2315.26 and .27; AS 2810.17)

The issuer used an IT system to initiate process and record transactions related to revenue and inventory. In its testing of controls over these accounts the firm tested various IT-dependent manual controls that used data and reports generated or maintained by this IT system. The firm did not identify and test controls that addressed whether the level of access provided to users was appropriate. (AS 2201.39)

The issuer used an IT system to initiate process and record transactions related to revenue and inventory. In its testing of controls over these accounts the firm tested various IT-dependent manual controls that used data and reports generated or maintained by this IT system. As a result of the deficiency in the firm's testing of ITGCs the firm's testing of these IT-dependent manual controls was not sufficient. (AS 2201.46)

The firm selected for testing certain controls that consisted of the issuer's review of the (1) allocation of labor and overhead costs to inventory and (2) reserve for excess and obsolete inventory. The firm did not identify and test any controls over the accuracy and completeness of certain information used in the operation of these controls. (AS 2201.39)

The firm selected for testing a control that consisted of the issuer's review of standard costing for inventory items with cost increases. In evaluating the design of this control the firm did not assess the effect of the issuer excluding decreases in costs on the control's ability to effectively prevent or detect a material misstatement. (AS 2201.42)

The firm selected for testing a control that consisted of the automated recording of inventory at standard cost and the issuer's review of variances between actual and standard costs. The firm did not test the automated aspect of this control. Further the firm did not evaluate the review procedures that the control owner performed related to the review of variances 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 that consisted of the issuer's review of the classification of inventory between raw materials work-in-process and finished goods. 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 did not perform procedures to test or test any controls over the completeness of a system-generated report that the firm used (1) to make its selections to test a control over the recording of inventory upon receipt and (2) in its substantive testing of inventory cut-off. (AS 1105.10)

During the year the issuer acquired a business and engaged a specialist to determine the fair values of the acquired intangible assets and the provision for contingent consideration to be paid to the seller. The firm's approach for substantively testing the fair values of the acquired intangible assets was to develop independent expectations of the estimates. The following deficiencies were identified: · The firm did not perform any procedures to evaluate the reasonableness of certain significant assumptions developed by the issuer which were also used by the firm in developing its independent expectations. (AS 2501.16)

During the year the issuer acquired a business and engaged a specialist to determine the fair values of the acquired intangible assets and the provision for contingent consideration to be paid to the seller. The firm's approach for substantively testing the fair values of the acquired intangible assets was to develop independent expectations of the estimates. The following deficiencies were identified: · The firm did not test or test any controls over the accuracy and/or completeness of certain data produced by the issuer and used by the firm in developing its independent expectations. (AS 1105.10)

During the year the issuer acquired a business and engaged a specialist to determine the fair values of the acquired intangible assets and the provision for contingent consideration to be paid to the seller. The firm's approach for substantively testing the fair values of the acquired intangible assets was to develop independent expectations of the estimates. The following deficiencies were identified: · The firm did not perform procedures to demonstrate it had a reasonable basis for certain assumptions it independently derived. (AS 2501.22)

The issuer used certain information technology (IT) systems to initiate process and/or record transactions related to revenue unbilled accounts receivable deferred revenue and inventory. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by these IT systems. As a result of the deficiencies in the firm's testing of IT general controls (ITGCs) the firm's testing of these automated and IT-dependent manual controls was not sufficient. (AS 2201.46)

During the year the issuer acquired a business and engaged a specialist to determine the fair values of the acquired intangible assets and the provision for contingent consideration to be paid to the seller. The firm's approach for substantively testing the fair values of the acquired intangible assets was to develop independent expectations of the estimates. The following deficiencies were identified: · For two of the acquired intangible assets the firm did not perform sufficient procedures to demonstrate it had a reasonable basis for an assumption it independently derived because the data it used to develop this assumption included unrelated data. (AS 2501.22)

During the year the issuer acquired a business and engaged a specialist to determine the fair values of the acquired intangible assets and the provision for contingent consideration to be paid to the seller. The firm's approach for substantively testing the fair values of the acquired intangible assets was to develop independent expectations of the estimates. The following deficiencies were identified: · For two of the acquired intangible assets the firm did not evaluate the relevance of certain external data it used to develop its independent expectations. (AS 1105.04 and .06)

During the year the issuer acquired a business and engaged a specialist to determine the fair values of the acquired intangible assets and the provision for contingent consideration to be paid to the seller. The firm's approach for substantively testing the fair values of the acquired intangible assets was to develop independent expectations of the estimates. The following deficiencies were identified: · For one of the acquired intangible assets the firm used an auditor-employed specialist to evaluate a significant assumption developed by the company's specialist which the firm used in developing its independent expectation of this estimate. The firm did not identify that the work of the auditor-employed specialist did not provide sufficient appropriate audit evidence because it did not evaluate the (1) relevance and reliability of external data that the company's specialist used to develop this assumption and (2) reasonableness of this assumption. (AS 1105.A8a and .A8b; AS 1201.C6 and .C7)

The firm did not evaluate whether in conformity with FASB ASC Topic 805 Business Combinations a separately identifiable intangible asset existed related to an agreement that was executed as part of the acquisition. (AS 2301.08)

The firm's approach for substantively testing the fair value of the contingent consideration to be paid to the sellers was to review and test the issuer's process. The firm's approach for evaluating the reasonableness of certain of the issuer's assumptions was to develop independent expectations of those assumptions. The firm did not compare the issuer's assumptions to these independent expectations which were affected by the audit deficiencies discussed above. (AS 2501.16)

The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. The issuer recognized certain revenue from one of its business units over time based on units completed to date relative to total contractual units. The firm did not identify and test any controls that addressed whether certain requirements of FASB ASC Topic 606 had been met in determining revenue recognition. (AS 2201.39)

The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. The firm did not perform sufficient substantive procedures to evaluate whether certain of this revenue was appropriately recognized because the firm only reviewed one customer change order. (AS 2301.08)

The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For the unbilled portion of this revenue the following additional deficiencies were identified: · The firm did not identify and test any controls that addressed the accuracy of this revenue. (AS 2201.39)

The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For the unbilled portion of this revenue the following additional deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of revenue journal entries and related support. 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 reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For the unbilled portion of this revenue the following additional deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of revenue journal entries and related support. The firm did not test the aspect of this control that addressed the accuracy and completeness of certain information used to record revenue. (AS 2201.42 and .44)

With respect to change management: · The firm selected for testing a control over the segregation of duties related to the ability to develop and implement changes to these IT systems. In its testing of the operating effectiveness of this control the firm did not test whether users with the ability to implement changes also had the ability to develop changes. (AS 2201.44)

The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For the unbilled portion of this revenue the following additional deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of contract setup within the issuer's IT system. The firm did not test the aspect of this control that addressed the accuracy of contractual units and rates. (AS 2201.42 and .44)

The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For the unbilled portion of this revenue the following additional deficiencies were identified: · The firm did not perform any procedures to test the completeness of this revenue. (AS 2301.08)

The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For another business unit the issuer recognized certain revenue over time based on costs incurred to date relative to total estimated costs to complete these contracts. Certain of this revenue included revenue from contract modifications that had not yet been approved by customers. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of revenue recognition for certain contracts. 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 internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For another business unit the issuer recognized certain revenue over time based on costs incurred to date relative to total estimated costs to complete these contracts. Certain of this revenue included revenue from contract modifications that had not yet been approved by customers. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of revenue recognition for modified contracts. The firm did not test the design of the aspects of this control related to unapproved contract modifications. (AS 2201.42)

The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For another business unit the issuer recognized certain revenue over time based on costs incurred to date relative to total estimated costs to complete these contracts. Certain of this revenue included revenue from contract modifications that had not yet been approved by customers. The following deficiencies were identified: · The firm did not perform procedures to evaluate whether unapproved contract modifications were accounted for in conformity with FASB ASC Topic 606. (AS 2301.08 and .11)

The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. For another business unit the issuer recognized certain revenue over time based on costs incurred to date relative to total estimated costs to complete these contracts. Certain of this revenue included revenue from contract modifications that had not yet been approved by customers. The following deficiencies were identified: · The issuer engaged a specialist to assist it in estimating the amount of revenue to be recognized from certain unapproved contract modifications using various significant assumptions. The firm did not (1) evaluate the reasonableness of the significant assumptions developed by the company's specialist or by the issuer (2) test the accuracy and completeness of information produced by the issuer that was used by the company's specialist and (3) evaluate whether the methods used by the company's specialist were appropriate under the circumstances. (AS 1105.A8a-c; AS 2501.16)

The firm's internal inspection program inspected this audit reviewed the Revenue and Related Accounts area and also identified the deficiencies below. The firm selected for testing controls that consisted of the issuer's reviews of allowances for accounts related to certain revenue. The firm did not identify and test any controls over the accuracy of certain reports used in the operation of these controls. (AS 2201.39)

The sample sizes the firm used in its substantive procedures to test certain revenue and related accounts 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 did not identify and test any controls that addressed whether the issuer's fair value disclosures for certain debt were measured in conformity with FASB ASC Topic 820. (AS 2201.39)

The firm did not perform any substantive procedures to test the issuer's fair value disclosures for this debt. (AS 2501.07)

With respect to change management: · The firm selected for testing certain controls over change management for these IT systems but did not perform sufficient procedures to test the completeness of the population of changes from which it made its selections for testing because it limited its procedures to testing the completeness of only one type of change. (AS 1105.10)

The firm did not identify and evaluate the issuer's omission of a required disclosure under FASB ASC Topic 820 related to the categorization of certain of this debt within the fair value hierarchy. (AS 2810.30 and .31) In connection with our review the issuer reevaluated its disclosure related to this debt and determined that a disclosure was omitted. The issuer did not file an amended Form 10-K or Form 8-K indicating that its previously issued financial statements should not be relied on. Instead the issuer corrected this omission in a subsequent filing.

For one business unit the issuer recognized several types of revenue. The following deficiencies were identified: · For one type of revenue the firm selected for testing various automated controls over the processing of certain orders through the issuer's IT systems. The firm's testing of each of these automated controls using a sample of only one instance of the control's operation was not sufficient because the firm did not test whether changes to configurations within these controls were subject to effective ITGCs over these IT systems. (AS 2201.46)

For one business unit the issuer recognized several types of revenue. The following deficiencies were identified: · For a second type of revenue the firm selected for testing a control that included the issuer's evaluation of whether delivery and installation were a single performance obligation. The firm did not test this aspect of the control. (AS 2201.42 and .44)

For one business unit the issuer recognized several types of revenue. The following deficiencies were identified: · For a second type of revenue the firm selected for testing a control that included the issuer's evaluation of whether delivery and installation were a single performance obligation. The firm did not identify and test any controls that addressed the risk that other performance obligations existed that would affect whether revenue was appropriately recognized. (AS 2201.39)

For one business unit the issuer recognized several types of revenue. The following deficiencies were identified: · For both types of revenue the firm did not identify and test any controls that addressed whether the quantities the issuer invoiced represented the quantities ordered by the customers. (AS 2201.39)

For another business unit the firm selected for testing a control over the transfer of data from the revenue system to the general ledger. The firm did not test the automated aspect of this control that addressed the completeness of the data transferred. (AS 2201.42 and .44)

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 deficiencies in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)