Explorer

The issuer used an IT system to initiate process and record certain inventory and inventory-related transactions and deployed a separate instance of the system at a majority of its warehouses. Changes to this system were first deployed to some warehouses for purposes of pilot testing after which the changes were deployed to the remaining warehouses. The following deficiency was identified: • The firm selected for testing an IT-dependent manual control over inventory that consisted of the performance of periodic cycle counts which used information generated by one of the automated controls discussed above. The accuracy and completeness of this information depended on the effective operation of this automated control. As a result of the deficiency in the firm's testing of this automated control as discussed above the firm's testing of this IT- dependent manual control was not sufficient. (AS 2201.46)

The issuer used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: The firm selected for testing a control that consisted of the issuer's review and approval of certain revenue-related transactions. The firm did not identify and test any controls over the accuracy and completeness of certain system-generated data used in the operation of the control. (AS 2201.39)

The issuer used an IT system to initiate process and record certain inventory and inventory-related transactions and deployed a separate instance of the system at a majority of its warehouses. Changes to this system were first deployed to some warehouses for purposes of pilot testing after which the changes were deployed to the remaining warehouses. The following deficiency was identified: • The firm did not obtain sufficient appropriate audit evidence with regard to the issuer's inventory cycle-count procedures over certain inventory. Specifically as a result of the deficiencies in the firm's testing of the automated and IT-dependent manual controls as 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 during the year. (AS 2510.11)

The issuer derives revenue through consolidated VIEs including their subsidiaries and relies on contractual arrangements with the VIEs and their shareholders to control the business operations of the consolidated VIEs. The issuer engaged an external specialist to provide a legal opinion regarding the issuer's consolidated VIEs including the validity and enforceability of contractual arrangements with the VIEs and their shareholders and the firm used the work of the company's specialist as audit evidence. The following deficiencies were identified: • The firm did not identify and test any controls over the issuer's review of the legal opinion prepared by the company's specialist which described uncertainties regarding the interpretation and application of current laws and regulations related to the structure of the VIEs and evaluation of the effect of such uncertainties on its ability to consolidate the VIEs. (AS 2201.39)

The issuer derives revenue through consolidated VIEs including their subsidiaries and relies on contractual arrangements with the VIEs and their shareholders to control the business operations of the consolidated VIEs. The issuer engaged an external specialist to provide a legal opinion regarding the issuer's consolidated VIEs including the validity and enforceability of contractual arrangements with the VIEs and their shareholders and the firm used the work of the company's specialist as audit evidence. The following deficiencies were identified: • The firm did not sufficiently evaluate the relevance and reliability of the work performed by the company's specialist and whether the specialist's findings support or contradict the issuer's rights and obligations related to the consolidation of the VIEs because it did not evaluate the nature of the uncertainties described in the legal opinion prepared by the company's specialist and perform additional procedures to address the risks associated with those uncertainties. (AS 1105.A9 and .A10)

The firm selected for testing a control over certain revenue that consisted of the issuer's review of an accounting analysis to ensure that revenue was appropriately recognized. 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 used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: 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 used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: The firm selected for testing controls over certain revenue and related accounts that consisted of the configuration of certain IT systems to automatically (1) update the order status (2) calculate and allocate revenue and (3) update order payment information. The firm used a “test of one” approach to test these controls but did not perform procedures beyond inquiry to evaluate whether the tested configurations were applied consistently across each processing alternative to support the use of such an approach. (AS 2201.46)

The issuer used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: The firm selected for testing a control that consisted of the issuer's review of the revenue recognition system logic. 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 used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: The firm selected for testing a control that consisted of the issuer's review and approval of a revenue-related calculation. As a result of the deficiencies in the firm's testing of certain controls discussed above the firm did not perform sufficient procedures to test the accuracy and completeness of certain information used in the operation of this control. (AS 2201.42 and .44)

The issuer used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: The firm did not perform procedures to test or test any controls over the completeness and/or accuracy of certain system-generated data used in its substantive testing of revenue and related accounts. (AS 1105.10)

The issuer used multiple information technology (IT) systems to initiate process and record transactions related to revenue and related accounts and recognized revenue as the respective performance obligations were satisfied. The following deficiency was identified: The sample sizes the firm used in certain of its substantive procedures to test 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 deficiencies in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The issuer derives revenue through a consolidated variable interest entity and its subsidiaries (“VIE”) and relies on contractual arrangements with the VIE and its shareholders to control the business operations of the consolidated VIE. The issuer engaged an external specialist to provide a legal opinion regarding the issuer's consolidated VIE including the validity and enforceability of contractual arrangements with the VIE and its shareholders and the firm used the work of the company's specialist as audit evidence. The following deficiency was identified: • The firm did not identify and test any controls over the issuer's review of the legal opinion prepared by the company's specialist which described uncertainties regarding the interpretation and application of current laws and regulations related to the structure of the VIE and evaluation of the effect of such uncertainties on its ability to consolidate the VIE. (AS 2201.39)

The issuer's general reserve component of the ALL included a qualitative reserve component that was determined by certain qualitative factors. The firm selected for testing a control that included the review of the qualitative component of the general reserve. 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 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 qualitative factors beyond (1) reading the issuer's analysis (2) comparing the basis points that were applied to the qualitative factors 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 prior year were directionally consistent with internal or external data. (AS 2501.09 .10 and .11)

The issuer's general reserve component of the ALL included a qualitative reserve component that was determined by certain qualitative factors. The firm selected for testing a control that included the review of the qualitative component of the general reserve. The firm did not evaluate the review procedures that the control owner performed with respect to certain qualitative factors 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 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 certain qualitative factors beyond (1) reading the issuer's analysis (2) comparing the basis points that were applied to the qualitative factors 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)

The issuer's general reserve component of the ALL included a qualitative reserve component that was determined by certain qualitative factors. The firm selected for testing a control that included the review of the qualitative component of the general reserve. 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 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 qualitative factors beyond (1) reading the issuer's analysis (2) comparing the basis points that were applied to the qualitative factors to the basis points that were applied in the prior year and performing a trend analysis and (3) assessing whether certain changes or lack thereof to the basis points from the prior year and the results from the resulting from the comparison and trend analysis were directionally consistent with internal or external data. (AS 2501.09 .10 and .11)

The firm relied on certain information technology general controls (ITGCs) in its substantive approach to testing revenue and accounts receivable. The following deficiencies were identified: · The firm selected for testing a control over change management but did not perform procedures to determine whether the population of changes from which it made its selections for testing represented the complete population of changes made to this system. (AS 1105.10)

The firm relied on certain information technology general controls (ITGCs) in its substantive approach to testing revenue and accounts receivable. The following deficiencies were identified: · The firm selected for testing certain IT application controls and IT-dependent manual controls over revenue and accounts receivable. The firm's approach to testing these controls depended on effective ITGCs including controls over change management. As a result of the deficiency in the firm's testing of the control discussed above the firm's testing of these IT application controls and IT-dependent manual controls was not sufficient. (AS 2301.18)

The firm relied on certain information technology general controls (ITGCs) in its substantive approach to testing revenue and accounts receivable. The following deficiencies were identified: · As a result of the firm's control testing deficiencies 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. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm identified fraud criteria for purposes of identifying and selecting journal entries for testing. In identifying journal entries that met the criteria the firm did not perform sufficient procedures because certain journal entries that met its criteria were not identified by the firm. (AS 2401.61)

The firm did not identify and appropriately address a departure from GAAP related to the omission of disclosures required by FASB ASC Topic 235 Notes to Financial Statements and FASB ASC Topic 606 Revenue from Contracts with Customers including the issuer's accounting policy for recording revenue in accordance with FASB ASC Topic 606; qualitative and quantitative information about its contracts with customers the significant judgments and changes in judgments made in applying the guidance in FASB ASC Topic 606 to those contracts; and any assets recognized from the costs to obtain or fulfill a contract with a customer. (AS 2810.30 and .31) In connection with our review the issuer reevaluated its disclosures related to revenue 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.

The issuer recorded certain acquired intangible assets inventory and fixed assets. The firm did not test certain assumptions used by external specialists to estimate the fair values of the acquired intangible assets and inventory. (AS 2502.26 and .28)

The issuer recorded certain acquired intangible assets inventory and fixed assets. The firm did not test issuer-provided data used by the external specialist to estimate the fair values of the acquired intangible assets. (AS 1210.12)

The issuer recorded certain acquired intangible assets inventory and fixed assets. The firm did not test the fair value of the acquired fixed assets. (AS 2502.15)

The firm did not evaluate whether the intangible assets were appropriately recorded as indefinite-lived including not considering contradictory evidence that indicated that certain of the intangible assets had finite lives. (AS 2810.03 and .30)

Prior to the report release date the firm did not complete all necessary auditing procedures and obtain sufficient evidence to support the representations in the auditor's report. Specifically the firm completed the performance and review of a significant number of auditing procedures after the report release date. (AS 1105.04; AS 1215.15)

The firm did not perform any procedures to test the appropriateness of the capitalization of certain costs to long-lived assets. (AS 2301.08)

The firm did not select journal entries and other adjustments for testing. (AS 2401.61)

Prior to the report release date the firm did not complete all necessary auditing procedures and obtain sufficient evidence to support the representations in the auditor's report. Specifically the firm completed the performance and review of a significant number of auditing procedures after the report release date. (AS 1105.04; AS 1215.15)

For one of the issuer's subsidiaries the firm did not perform any procedures to identify and select journal entries and other adjustments for testing without having an appropriate basis for excluding that subsidiary. (AS 2401.61)

For another of the issuer's subsidiaries the firm identified journal entries that met certain criteria for testing. The firm did not examine the underlying support for the journal entries and instead limited its procedures to inquiry of management. (AS 2401.61)

The firm's substantive procedures at year end to test certain inventory included performing physical inventory count procedures using a report obtained from the issuer. The firm did not perform any procedures to test the completeness of the report. (AS 1105.10)

The firm's substantive procedures at year end to test certain inventory included performing physical inventory count procedures using a report obtained from the issuer. The firm did not perform procedures beyond inquiry and observation of the physical condition of inventory to test the price of this inventory and the related reserve. (AS 2301.08; AS 2501.07)

The issuer wrote off certain other inventory at year end. The firm did not perform any procedures to evaluate this write-off. (AS 2301.08)

The issuer engaged in a significant transaction. The firm did not perform any procedures to evaluate whether the transaction was accounted for in conformity with GAAP. (AS 2301.08)

The firm did not perform any procedures to evaluate whether certain transactions were appropriately presented as revenue in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2301.08 and .13)

To test certain significant accounts the firm's substantive procedures included confirmation of the balances. The issuer sent the confirmation request on behalf of the firm and received the response directly from the recipient of the request. The firm did not maintain control of the confirmation request and response through direct communication with the intended recipient of the confirmation request. (AS 2310.28)

To test certain significant accounts the firm's substantive procedures included confirmation of the balances. The issuer sent the confirmation request on behalf of the firm and received the response directly from the recipient of the request. For one of these significant accounts the firm did not perform substantive procedures beyond comparing the amount to the confirmation to test the valuation of the account. (AS 2501.07)

The firm did not identify and evaluate a departure from GAAP related to the issuer's presentation of a significant account. (AS 2810.30 and .31)

The firm did not select journal entries and other adjustments for testing. (AS 2401.61)

Prior to the report release date the firm did not complete all necessary auditing procedures and obtain sufficient evidence to support the representations in the auditor's report. Specifically the firm completed the performance and review of a significant number of auditing procedures after the report release date. (AS 1105.04; AS 1215.15)

The issuer engaged in a significant transaction. The firm did not perform any procedures to evaluate whether the transaction was accounted for in conformity with GAAP. (AS 2301.08)

The firm did not identify and evaluate that the issuer's recognition of revenue was not in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2810.30)

The firm did not identify and evaluate the issuer's omission of certain disclosures related to revenue required by FASB ASC Topic 606. (AS 2810.30 and .31)

The firm did not perform procedures to evaluate whether the issuer performed an assessment of certain assets for recoverability when the firm was aware of events or changes in circumstances that existed and indicated that the carrying value may not be recoverable. (AS 2301.08; AS 2810.03)

The firm did not identify and evaluate the issuer's omission of a disclosure related to these assets required by GAAP. (AS 2810.30 and .31)

The firm did not perform procedures to identify and select journal entries and other adjustments for testing to address the potential for material misstatement due to fraud. (AS 2401.58)