Explorer

To test certain prepayments the firm sent positive confirmation requests to a sample of the issuer's vendors. 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. (AS 2310.31)

The firm was instructed by the principal auditor to perform certain procedures to test the existence of accrued expenses which included sending positive confirmation requests to a sample of the issuer's vendors. The following deficiency was identified: • For one confirmation request that was not returned the firm did not perform alternative procedures that provided sufficient appropriate audit evidence that the accrued expense existed as of year end. (AS 2310.31)

The firm was instructed by the principal auditor to perform certain procedures to test the existence of accrued expenses which included sending positive confirmation requests to a sample of the issuer's vendors. 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 was instructed by the principal auditor to perform certain procedures to test the existence of deferred revenue. The firm selected a sample of balances to test certain deferred revenue but did not perform any procedures to evaluate whether the balances represented liabilities as of year end. (AS 2301.08)

The firm was instructed by the principal auditor to perform certain procedures to test the existence of deferred revenue. The firm did not perform procedures to test or identify and test any controls over the completeness of an issuer-prepared report from which it made certain of its selections for testing. (AS 1105.10)

The firm was instructed by the principal auditor to perform year-end cut-off procedures. The firm did not perform procedures to test or identify and test any controls over the completeness of the system-generated report used to select samples subsequent to year end to test cut-off. (AS 1105.10)

The issuer's policy is to apply payments to the oldest outstanding accounts receivable balance first. The firm used system-generated accounts receivable aging reports to substantively test the allowance for credit losses. The firm did not perform sufficient procedures to test the accuracy of these reports because it did not perform procedures to evaluate whether any accounts receivable balances were inappropriately removed from the aging reports due to the issuer's policy while other accounts receivable balances inappropriately remained. (AS 1105.10)

The firm did not perform procedures to test certain revenue including whether all criteria for revenue recognition had been met. (AS 2301.08)

The firm did not perform sufficient procedures to evaluate whether the issuer had properly identified accounted for and disclosed its related party relationships and transactions. Specifically the firm did not evaluate whether certain transactions (communicated by the firm to the audit committee as significant unusual transactions) with a company for which (i) a shareholder of the issuer was a director and (ii) an immediate family member of the issuer's majority shareholders was the chief executive officer were related party transactions that the issuer should have identified and disclosed and whether such transactions were accounted for appropriately. (AS 2410.14 .15 and .17)

The firm did not perform sufficient procedures to evaluate whether the issuer had properly identified accounted for and disclosed its related party relationships and transactions. Specifically the firm did not perform procedures to obtain an understanding of the business purpose (or the lack thereof) of the transactions. (AS 2401.66A .67 and .67A)

The firm's approach for substantively testing the issuer's impairment analyses for certain long-lived assets was to develop independent expectations. The firm did not sufficiently take into account the requirements of certain elements of the applicable financial framework because it did not take into account certain factors relevant to the estimates in developing its expectations. (AS 2501.21)

The firm's approach to testing the account included selecting a sample of transactions from certain portions of the account using issuer-provided reports. The firm did not test the completeness of the reports from which it made sample selections for three portions of the account (AS 2315.24).

The firm's approach to testing the account included selecting a sample of transactions from certain portions of the account using issuer-provided reports. The firm did not test or in the alternative identify and test any controls over the accuracy and completeness of data and reports used to test two other portions of the account. (AS 1105.10).

The firm did not evaluate whether the unbilled fees included in a confirmation from legal counsel should have been accrued as of year end. (AS 2301.08)

In addition the firm noted certain expenses recorded in the current year that related to services received in the prior year. The firm did not evaluate the effects of these misstatements on the current year financial statements. (AS 2810.17 .18 and .19)

The firm selected for testing two controls over the review of transactions recorded to a significant account. For one control 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 selected for testing two controls over the review of transactions recorded to a significant account. The firm did not test the aspects of both of these controls that addressed the accuracy and completeness of the information used in their operation. (AS 2201.42 and .44)

The firm selected for testing controls that consisted of the issuer's review of its assessment of these assets for possible impairment. 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 selected for testing controls that consisted of the issuer's review of its assessment of these assets for possible impairment. The firm did not test the aspects of these controls that addressed the accuracy and completeness of the information used in their operation. (AS 2201.42 and .44)

The issuer issued convertible notes and related warrants. Certain of the convertible notes included discounts. The issuer did not recognize a derivative liability or beneficial conversion feature associated with any of the convertible notes or warrants. The following deficiencies were identified: · The firm did not perform procedures to test the valuation of the convertible notes or warrants. (AS 2502.15)

The issuer issued convertible notes and related warrants. Certain of the convertible notes included discounts. The issuer did not recognize a derivative liability or beneficial conversion feature associated with any of the convertible notes or warrants. The following deficiencies were identified: · The firm did not evaluate whether the issuer's accounting for the convertible notes was appropriate including whether (1) the conversion options related to the convertible notes should have been separated and accounted for as derivatives in conformity with FASB ASC Subtopic 815-15 Derivatives and Hedging — Embedded Derivatives or (2) the convertible notes should have been bifurcated into a liability component and the embedded conversion option (including consideration of a potential beneficial conversion feature) in conformity with FASB ASC Subtopic 470-20 Debt — Debt with Conversion and Other Options. (AS 2810.30)

The issuer issued convertible notes and related warrants. Certain of the convertible notes included discounts. The issuer did not recognize a derivative liability or beneficial conversion feature associated with any of the convertible notes or warrants. The following deficiencies were identified: · The firm did not evaluate whether the issuer's accounting for the warrants was in accordance with GAAP. (AS 2810.30)

The issuer issued convertible notes and related warrants. Certain of the convertible notes included discounts. The issuer did not recognize a derivative liability or beneficial conversion feature associated with any of the convertible notes or warrants. The following deficiencies were identified: · The firm did not test the number and valuation of the shares issued upon conversion and evaluate whether the conversions were recorded and presented appropriately. (AS 2301.08; AS 2810.30)

The firm did not perform sufficient procedures to test expenses for other equity-based transactions because it did not (1) obtain an understanding of the terms of the arrangements (2) evaluate whether the expenses were recorded in the proper period and (3) evaluate whether the expenses were appropriately valued in accordance with GAAP. (AS 2301.08; AS 2810.30)

To test revenue the firm selected sales transactions for testing that exceeded a monetary threshold. The firm did not perform any procedures to test the remaining population of sales transactions. (AS 1105.27)

To test revenue the firm selected sales transactions for testing that exceeded a monetary threshold. For the sales transactions selected for testing the firm did not evaluate whether all of the relevant revenue recognition criteria had been met. (AS 2301.08)

In testing a long-lived asset the firm identified certain indicators of potential impairment. The firm did not perform sufficient procedures to evaluate whether the carrying value of the asset was recoverable because it limited its procedures to confirming the terms of the underlying agreement and making inquiries of the issuer. (AS 2501.07)

The firm did not evaluate beyond inquiry the reasonableness of certain significant assumptions used in the issuer's valuation of a significant account. (AS 2501.16)

To substantively test long-lived asset additions the firm selected additions for testing that exceeded a monetary threshold. The firm did not perform any procedures to test the remaining population of long-lived asset additions. (AS 1105.27; AS 2301.08)

The firm did not evaluate whether an exploration and evaluation asset had been acquired and the title had been transferred to the issuer. (AS 2301.08)

The firm did not evaluate beyond inquiry the issuer's conclusion that there were no indicators of potential impairment for this asset even though there was evidence in the financial statements that an indicator of potential impairment existed. (AS 2301.08 and .11; AS 2810.03)

The issuer developed an assumption that it used to capitalize costs related to other exploration and evaluation assets. The firm did not evaluate whether the issuer had a reasonable basis for this significant assumption. (AS 2501.16)

The issuer's general reserve component of the ALL included a qualitative reserve component ('qualitative component') that was determined by certain qualitative factors. The firm's approach for substantively testing the ALL was to review and test management's process. The firm did not perform procedures to evaluate the reasonableness of the basis points that were applied to determine the qualitative component beyond (1) reading the issuer's analysis and vouching the data to supporting documentation (2) comparing these basis points to the basis points that were applied in the prior year and (3) assessing whether certain changes or lack thereof to the basis points from the prior year were directionally consistent with internal or external data. (AS 2501.09 .10 and .11) [This citation refers to AS 2501 Auditing Accounting Estimates which was in effect for this audit. This standard was replaced by AS 2501 Auditing Accounting Estimates Including Fair Value Measurements which became effective for audits of financial statements for fiscal years ending on or after December 15 2020.]

The firm did not appropriately consider the characteristics of potentially fraudulent journal entries when identifying and selecting journal entries for testing and instead haphazardly selected entries for testing. (AS 2401.61)

The issuer disclosed the amounts of unsatisfied performance obligations. The following deficiencies were identified: · The firm did not identify and test any controls over the unsatisfied performance obligations the issuer expected to be recognized as revenue within the next 12 months. (AS 2201.39)

The issuer assigned each loan a loan risk rating which was an important input in estimating the quantitative component of the ACL. The firm selected for testing a control that included the issuer's review of the risk ratings for certain loans. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of these risk ratings. (AS 2201.42 and .44)

The issuer assigned each loan a loan risk rating which was an important input in estimating the quantitative component of the ACL. The firm selected for testing a control that included the issuer's review of the risk ratings for certain loans. For this control and two other controls the firm selected for testing over the ACL the firm did not identify and test any controls over the accuracy and completeness of certain loan information used in the operation of these controls. (AS 2201.39)

The issuer disclosed the amount of unsatisfied performance obligations. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's review of this disclosure. The firm did not identify and test any controls over the accuracy and completeness of the issuer-prepared schedules related to this disclosure that were used in the operation of this control. (AS 2201.39)

The issuer disclosed the amount of unsatisfied performance obligations. The following deficiencies were identified: · The firm used these issuer-prepared schedules in its substantive testing of this disclosure but did not perform any procedures to test or test any controls over the accuracy and completeness of these schedules. (AS 1105.10)

The issuer disclosed the amount of unsatisfied performance obligations. The following deficiencies were identified: · The firm did not identify and evaluate a misstatement in this required disclosure under FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2810.30 and .31)

The issuer performed cycle counts of certain inventory. The firm did not identify and test any controls that addressed whether this inventory was counted with sufficient frequency in accordance with the issuer's cycle-count policy. (AS 2201.39)

The firm did not obtain sufficient appropriate audit evidence that the cycle-count procedures the issuer used for this inventory were sufficiently reliable to produce results substantially the same as those that would have been obtained by a count of all items each year. (AS 2510.11)

The issuer engaged specialists to determine the fair value of certain leased assets using various data and assumptions. The following deficiencies were identified: · The firm did not perform procedures to (1) test the accuracy and completeness of issuer-produced data used by the company's specialists and (2) evaluate the relevance and reliability of external information used by one of the company's specialists. (AS 1105.A8a)

The issuer engaged specialists to determine the fair value of certain leased assets using various data and assumptions. The following deficiencies were identified: · The firm did not evaluate the reasonableness of significant assumptions used by the company's specialists. (AS 1105.A8b)

The issuer used (1) store-level operating results to evaluate whether any impairment indicators existed for its long-lived assets including lease right-of-use assets and (2) store-level cash-flow forecasts to evaluate the recoverability of certain of these assets. The issuer excluded certain costs from these analyses. The following deficiencies were identified: · The firm selected for testing a control that included the issuer's reviews of these operating results and cash-flow forecasts. The firm did not evaluate the specific review procedures that the control owner performed to assess the appropriateness of excluding these costs. (AS 2201.42 and .44)

The issuer disclosed the amounts of unsatisfied performance obligations. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of unsatisfied performance obligations that it expected to be recognized as revenue beyond the next 12 months. The firm did not identify and test any controls over the accuracy and completeness of the report used in the operation of this control. (AS 2201.39)

The issuer used (1) store-level operating results to evaluate whether any impairment indicators existed for its long-lived assets including lease right-of-use assets and (2) store-level cash-flow forecasts to evaluate the recoverability of certain of these assets. The issuer excluded certain costs from these analyses. The following deficiencies were identified: · The firm used these operating results in its substantive procedures to evaluate whether any impairment indicators existed for these assets. The firm did not evaluate whether these excluded costs were directly associated with the identified asset groups. (AS 2301.08)

The issuer used (1) store-level operating results to evaluate whether any impairment indicators existed for its long-lived assets including lease right-of-use assets and (2) store-level cash-flow forecasts to evaluate the recoverability of certain of these assets. The issuer excluded certain costs from these analyses. The following deficiencies were identified: · The firm's approach for substantively testing the recoverability of certain of these assets was to test the issuer's process. The firm did not evaluate whether the issuer's method to determine the recoverability of these assets using cash-flow forecasts that excluded these costs was in conformity with FASB ASC Topic 360 Property Plant and Equipment. (AS 2501.10)

The issuer recorded available-for-sale securities at fair value. The firm selected for testing a control that included comparing recorded prices from an external service provider to prices determined by the control owner. The firm did not evaluate the specific review procedures that the control owner performed to (1) determine the comparative prices and (2) to identify items for follow-up. (AS 2201.42 and .44)

The firm did not perform sufficient procedures to evaluate the issuer's presentation of certain assets as current assets because it did not evaluate beyond inquiring of management the issuer's intent to consume all of these assets within one year from the balance sheet date. (AS 2301.08)