Explorer

The issuer disclosed the amounts of unsatisfied performance obligations. The following deficiencies were identified: · The firm performed a substantive analytical procedure to test this disclosure. The firm did not determine whether the expectation it used in this analytical procedure was based on predictable relationships. (AS 2305.13 and .14)

The issuer disclosed the amounts of unsatisfied performance obligations. The following deficiencies were identified: · The firm established its threshold for investigating differences based on a level of control reliance that was not supported due to the above deficiencies in the firm's testing of controls. As a result the threshold that the firm used did not provide the desired level of assurance that misstatements that could have been material would be identified. (AS 2301.16 .18 and .37; AS 2305.20)

The firm sent a positive confirmation request to the custodian for certain pension plan assets which was returned with exceptions. The firm did not evaluate the nature of these exceptions. (AS 2310.33)

The issuer assigned each loan a loan risk rating which was an important input in estimating the quantitative component of the ACL. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review for a sample of loans of the loan risk ratings assigned to the loans. The firm identified deviations in the operation of this control but did not evaluate the effect of these deviations on the operating effectiveness of the control. (AS 2201.48)

The issuer assigned each loan a loan risk rating which was an important input in estimating the quantitative component of the ACL. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review for a sample of loans of the loan risk ratings assigned to the loans. In its testing of the operating effectiveness of this control the firm excluded certain loans from its testing population. (AS 2201.44)

The issuer assigned each loan a loan risk rating which was an important input in estimating the quantitative component of the ACL. The following deficiencies were identified: · The firm's substantive procedures to test the reasonableness of the assigned loan risk ratings for certain loans included making a selection of loans for testing. The firm identified differences in the assigned loan risk ratings but did not evaluate the effect of these differences on whether it had obtained sufficient appropriate audit evidence. Further the firm did not perform any substantive procedures to test the loan risk ratings for the loans that were excluded from the firm's control testing procedures discussed above. (AS 2301.08)

The issuer determined the qualitative reserve component of the ACL using various qualitative factors. The firm selected for testing controls that included the issuer's reviews of these factors. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of these factors. (AS 2201.42 and .44)

The issuer recognized revenue from multiple revenue streams. The following deficiency was identified: · The firm selected for testing controls over certain revenue and related accounts receivable that consisted of (1) the issuer's performance of consistency checks between its systems that track the delivery of services and other systems where sales orders are manually entered as received and (2) management's review of the exception reports produced from these checks that reflect anomalies in the data between the various systems. The firm did not identify and test any controls over the accuracy and completeness of the exception reports used in the operation of these controls. (AS 2201.39)

The issuer recognized revenue from multiple revenue streams. The following deficiency was identified: · The firm did not identify and test any controls over the occurrence of certain revenue. (AS 2201.39)

The issuer recognized revenue from multiple revenue streams. The following deficiency was identified: · The firm did not perform any substantive procedures to test the occurrence of certain revenue. AS 2301.08)

The issuer recognized revenue from multiple revenue streams. The following deficiency was identified: · The sample sizes the firm used in certain of its substantive procedures to test revenue and related 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 in the first bullet above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm selected for testing a control that consisted of the component's review of topside journal entries related to revenue recognition. 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 used certain historical data of the component to evaluate the reasonableness of certain assumptions the component used to recognize revenue for a material contract. The firm did not perform any procedures to test or in the alternative identify and test any controls over the accuracy and completeness of the historical data used in its evaluation. (AS 1105.10)

The firm's substantive procedures to test an assumption used to recognize revenue included substantive analytical procedures. In performing these procedures the firm did not develop expectations at a level of precision that provided the desired level of assurance that differences that could be potential material misstatements individually or in the aggregate would be identified for investigation. (AS 2305.17)

The firm selected for testing a control that consisted of the issuer's monthly comparison of revenue by customer to revenue recorded in the prior month and the investigation of variances over an established threshold. The firm did not evaluate the specific review procedures that the control owner performed to investigate identified variances and determine whether items identified for follow-up had been appropriately resolved. (AS 2201.42 and .44)

The issuer used an information-technology system to calculate and record the cost of its inventory. The firm did not identify and test any controls over the calculation of the cost of inventory. (AS 2201.39)

The sample sizes the firm used in certain of its substantive procedures to test the valuation of 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 generated certain revenue at numerous locations from sales of multiple types of products. The firm selected for testing controls over this revenue that included (1) reviews of each location's monthly operating results and (2) reviews of monthly and year-to-date revenue for each type of product. The firm did not evaluate the specific review procedures that the control owners performed to evaluate whether the amounts recognized as revenue were appropriate. (AS 2201.42 and .44)

The issuer was self-insured for certain liabilities and it used a service organization to administer the majority of the related claims. The claims data processed by this service organization were used to estimate the issuer's liabilities for unpaid insurance claims. The firm selected for testing a control over the accuracy of these claims data that consisted of claim audits performed by the service organization. The firm obtained the service auditor's report on the operating effectiveness of the service organization's controls but did not identify that the service auditor's testing of this control did not address the accuracy of the claims data. (AS 2201.B21)

The firm's approach for testing the liabilities for unpaid insurance claims was to develop an independent estimate. The firm did not perform substantive procedures to test or (as discussed above) to sufficiently test controls over the accuracy of claims data used in its independent estimate beyond comparing a sample of claims from the service organization's claims processing system to claims data in the same system. (AS 1105.10)

The issuer used claims activity reports to estimate its self-insurance reserves. The firm selected for testing a control that included a review of these claims activity reports for accuracy. The firm did not evaluate the specific procedures that the control owner performed to address the accuracy of certain data including claims' incident dates in the claims activity reports. (AS 2201.42 and .44)

The firm's approach for testing the self-insurance reserves was to develop an independent estimate. The firm did not perform substantive procedures to test or (as discussed above) to sufficiently test controls over the accuracy of claims' incident dates used in its independent estimate beyond comparing the incident dates in the claims activity reports to the system that generated those reports. (AS 1105.10)

The firm selected for testing a control over the valuation of certain investments that consisted of the review of analyses and memoranda summarizing established fair values. The firm did not evaluate the review procedures that the control owners performed including the criteria that the control owners used to identify items for follow up and whether those items were appropriately resolved. (AS 2201.42 and .44)

The issuer used historical claims data to estimate the liabilities for incurred but not reported claims. These data consisted of numerous loss triangles that included monthly historical claims incurred and claims adjudicated or paid for multiple periods. For one of the issuer's reporting segments the firm selected for testing an automated application control over the generation of reports containing historical claims data. The firm did not test the configuration of the automated control or perform other procedures that would have provided sufficient appropriate audit evidence that the automated control was designed and operating effectively. (AS 2201.42 .44 and .B9)

The firm sent positive confirmation requests to the issuer's customers for a sample of deposit liabilities. For the items in its sample for which the requested confirmations were not returned the firm did not perform alternative procedures that provided sufficient evidence that the recorded amounts of the deposit liabilities were accurate as of the confirmation date. (AS 2310.31)

The issuer recorded a chargeback accrual and used a one-month settlement-period assumption to estimate a portion of this accrual. The firm selected for testing a control that consisted of the review of the chargeback accrual including the reasonableness of the settlement-period assumption. 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 issuer concluded at year end that its unevaluated properties were not impaired primarily based on management's plans to drill or otherwise extend the expiring leases on certain of these properties. The firm concluded that the issuer's assessment was reasonable without performing procedures beyond inquiry to evaluate management's intent to extend these expiring leases. Further the firm did not evaluate information that it obtained that appeared to be inconsistent with management's intent including that the issuer's budget for the following year did not include any capital expenditures for these properties. (AS 2501.11; AS 2810.03)

The issuer performed cycle counts of inventory at certain of the issuer's locations. The firm selected for testing controls that consisted of the issuer's cycle-count procedures and reviews of reports to monitor the frequency and accuracy of the counts. The following deficiencies were identified: · The issuer designed its cycle-count procedures to exclude up to half of the inventory at each location from the cycle counts. In evaluating the design of these controls the firm did not assess the effect of the issuer excluding this portion of inventory on the controls' ability to effectively prevent or detect a material misstatement. (AS 2201.42)

The issuer performed cycle counts of inventory at certain of the issuer's locations. The firm selected for testing controls that consisted of the issuer's cycle-count procedures and reviews of reports to monitor the frequency and accuracy of the counts. The following deficiencies were identified: · The firm did not evaluate whether these controls were appropriately designed to monitor the accuracy of the cycle counts and address whether sufficient inventory items were counted with sufficient frequency because the firm did not identify that the reports the control owners reviewed did not include information related to the frequency with which each item was counted and the accuracy of the cycle counts for each of these items. (AS 2201.42)

The issuer performed cycle counts of inventory at certain of the issuer's locations. The firm selected for testing controls that consisted of the issuer's cycle-count procedures and reviews of reports to monitor the frequency and accuracy of the counts. The following deficiencies were identified: · The issuer's cycle-count procedures were designed to have the same person responsible for generating count sheets performing the cycle counts entering the results into the system following up on identified differences and posting certain adjustments. The firm did not identify and evaluate whether this resulted in a lack of segregation of duties. (AS 2201.42)

Due to the deficiencies discussed above 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 firm did not perform any procedures to evaluate certain intangible assets for possible impairment despite the issuer's deteriorating financial results and the issuer recording an impairment of other intangible assets during the year. (AS 2301.08)

The firm's sample for testing certain revenue was too small to provide sufficient appropriate audit evidence because in determining its sample size the firm inappropriately used a risk of material misstatement that was lower than its assessed risk of material misstatement for this revenue. (AS 2315.23 and .23A)

The firm's approach for substantively testing the chargeback accrual was to review and test management's process. The firm did not perform procedures beyond inquiry to assess the reasonableness of the settlement-period assumption that the issuer used to estimate a portion of the chargeback accrual. (AS 2501.11)

The issuer determined the fair value of a contingent liability using forecasted EBITDA and other assumptions. The firm selected for testing a control that consisted of the review of the issuer's annual forecast including the forecasted EBITDA assumption. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the forecasted EBITDA assumption. (AS 2201.42 and .44)

The firm did not identify and test any controls over the existence of inventory at certain of the issuer's locations. (AS 2201.39)

The firm selected for testing a control that consisted of reviews of the appropriateness of the models the issuer used to determine the fair values of investments and derivatives. 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 a control over the valuation of the issuer's investments and derivatives that consisted of reviews of the recorded fair values. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of certain assumptions used to determine these fair values. (AS 2201.42 and .44)

The sample sizes the firm used in certain of its substantive procedures to test these investments and derivatives 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 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 any substantive procedures to test investments and derivatives at certain of the issuer's business units. (AS 2301.08)

The firm selected for testing a control that included the assessment of the issuer's properties that had no assigned oil and gas reserves ('unevaluated properties') for possible impairment. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the assumptions management used to conclude that there was no impairment for these properties. (AS 2201.42 and .44)

With respect to four types of revenue the following deficiencies were identified: · 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)

With respect to four types of revenue the following deficiencies were identified: · The firm's substantive procedures to test three of these types of revenue consisted of substantive analytical procedures. The firm used revenue data that were based on information from the various source systems to develop its expectations but did not test or identify and test controls over the accuracy and completeness of these revenue data. (AS 2305.16)

With respect to four types of revenue the following deficiencies were identified: · The firm selected for testing controls that consisted of the issuer's reviews of financial results including comparisons of each type of revenue to prior-period revenue and for three of these types of revenue to forecasted revenue. 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)

With respect to four types of revenue the following deficiencies were identified: · The firm selected for testing controls over the forecasted revenue used in the operation of the controls discussed above. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the forecasted revenue. (AS 2201.42 and .44)

With respect to four types of revenue the following deficiencies were identified: · The firm did not identify and test any controls over the accuracy and completeness of the forecast reports used in the operation of these controls. (AS 2201.39)

With respect to other types of revenue that were recorded at certain of the issuer's business units ('other revenue types') the following deficiencies were identified: · The firm did not evaluate whether specific risks of material misstatement existed for these other revenue types including whether the risks of material misstatement that the firm associated with revenue types at other business units subject to more extensive audit procedures also applied to these other revenue types. (AS 2101.11 and .12; AS 2201.B10)

With respect to other types of revenue that were recorded at certain of the issuer's business units ('other revenue types') the following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's reviews of financial results including these other revenue types. 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)

With respect to other types of revenue that were recorded at certain of the issuer's business units ('other revenue types') the following deficiencies were identified: · The firm did not perform any substantive procedures to test these other revenue types. (AS 2301.08)

The firm's substantive procedures to test accounts receivable as of an interim date consisted of performing confirmation procedures for a sample of invoices. The firm did not perform sufficient procedures to extend its conclusions from the interim date to year end because its procedures were limited to performing confirmation procedures for a small sample of invoices recorded as accounts receivable at year end. (AS 2301.45)