Explorer

As a result of the firm's ITGC testing deficiency the firm did not perform sufficient substantive procedures to test a revenue-related account because it did not test or (as discussed above) sufficiently test controls over the accuracy and completeness of certain system-generated data that it used to substantively test the account balance. (AS 1105.10)

The firm selected for testing a control over certain revenue that consisted of the issuer's inspection of source documents that were used to record the revenue. The firm did not perform sufficient procedures to test the operating effectiveness of this control because it did not test an aspect of the control involving the issuer's inspection of certain of these source documents. (AS 2201.44)

The firm did not perform procedures to test a revenue-related account beyond (1) comparing the account balance at the end of the current year to the account balance at the end of the prior year (2) testing the clerical accuracy of a report the issuer used to calculate the account balance (3) recalculating the account balance using the same information that the issuer used to calculate the balance and (4) reconciling the account balance to the general ledger. (AS 2301.08)

The firm identified and tested certain controls over related party transactions. The following deficiency was identified: • The firm selected for testing a control that consisted of the issuer's review of contracts with suppliers to determine if they were with a related party. The firm did not evaluate the specific review procedures that the control owner performed to assess whether contracts were with a related party. (AS 2201 .42 and .44)

The firm identified and tested certain controls over related party transactions. The following deficiency was identified: • For all contracts that were identified as contracts with related parties the firm did not identify and test any controls that addressed whether the transactions under these contracts were included in the issuer's related party disclosures. (AS 2201.39)

The firm identified and tested certain controls over related party transactions. The following deficiency was identified: • The firm selected for testing a control that consisted of the issuer's comparison of related party transactions to a list of related parties prepared by the issuer's legal department. The firm did not identify and test any controls over the completeness of the list of related parties that the control owner used in the operation of this control. (AS 2201.39)

Deficiency evaluating an auditor-employed specialist's work supporting the valuation of a liability.

The firm selected for testing controls over revenue including certain automated controls related to the initiation processing and recording of revenue. The automated controls included (1) a three-way match between the customer purchase order bill of lading and invoice and (2) the generation of nightly exception reports. Certain of these automated controls included a manual element that consisted of the confirmation of shipment by warehouse staff. The firm's approach to testing these controls was to test a single transaction. The following deficiencies were identified: · The firm did not evaluate whether each automated control was configurable and if so whether each control was configured appropriately within the system and as a result the firm's testing of these automated controls using a sample of only one instance was not sufficient. (AS 2201.42 and .44)

The firm selected for testing controls over revenue including certain automated controls related to the initiation processing and recording of revenue. The automated controls included (1) a three-way match between the customer purchase order bill of lading and invoice and (2) the generation of nightly exception reports. Certain of these automated controls included a manual element that consisted of the confirmation of shipment by warehouse staff. The firm's approach to testing these controls was to test a single transaction. The following deficiencies were identified: · The firm did not test all relevant scenarios of the automated controls to ensure the system processed transactions as designed for all scenarios. (AS 2201.42 and .44)

The firm selected for testing controls over revenue including certain automated controls related to the initiation processing and recording of revenue. The automated controls included (1) a three-way match between the customer purchase order bill of lading and invoice and (2) the generation of nightly exception reports. Certain of these automated controls included a manual element that consisted of the confirmation of shipment by warehouse staff. The firm's approach to testing these controls was to test a single transaction. The following deficiencies were identified: · The firm did not perform any procedures to test the manual element of the controls. (AS 2201.42 and .44)

The firm selected for testing controls over revenue including certain automated controls related to the initiation processing and recording of revenue. The automated controls included (1) a three-way match between the customer purchase order bill of lading and invoice and (2) the generation of nightly exception reports. Certain of these automated controls included a manual element that consisted of the confirmation of shipment by warehouse staff. The firm's approach to testing these controls was to test a single transaction. The following deficiencies were identified: · The firm did not identify and test any controls over the review of the system-generated exception reports resulting from the three-way match control. (AS 2201.39)

The firm selected for testing controls over inventory including two automated controls related to (1) the recording of inventory at standard cost when warehouse staff marked inventory as received in the system and (2) the application of standard labor and overhead to materials inventory. The firm's approach to testing these controls was to test a single transaction. The firm did not evaluate whether each automated control was configurable and if so whether each control was configured appropriately within the system and as a result the firm's testing of these automated controls using a sample of only one instance was not sufficient. Further the firm did not perform any procedures to test the manual aspect of an automated control over inventory related to the manual confirmation of inventory received. (AS 2201.42 and .44)

The firm selected for testing controls over accounts receivable at five of the issuer's locations including certain automated and manual controls related to the matching of cash receipts to the corresponding invoices and application of the receipts to the correct accounts receivable balances. For four of these locations the issuer changed from a manual cash application control to an automated cash application control during the first quarter of the year. The automated control included a manual element that used system-generated reports to identify investigate and apply cash receipts that were not automatically processed. The following deficiency was identified: · For four locations the firm did not perform sufficient procedures to test the automated control because the firm did not (1) evaluate whether the control was configurable or programmable within the system and (2) perform procedures to test the configuration or program of the control as applicable. Further the firm did not test each relevant scenario of the automated control to ensure the system processed transactions as designed. (AS 2201.42 and 44)

The firm's procedures to test the existence and valuation of accounts receivable included selecting a sample of customer invoices for testing using a sampling approach that was based on obtaining a certain level of audit evidence from its other substantive procedures. The sample size the firm used was too small to provide sufficient appropriate audit evidence over accounts receivable because the firm's other substantive procedures did not provide the level of substantive evidence needed to support its sampling approach. (AS 2315.16 .19 .23 and .23A)

The firm selected for testing controls over accounts receivable at five of the issuer's locations including certain automated and manual controls related to the matching of cash receipts to the corresponding invoices and application of the receipts to the correct accounts receivable balances. For four of these locations the issuer changed from a manual cash application control to an automated cash application control during the first quarter of the year. The automated control included a manual element that used system-generated reports to identify investigate and apply cash receipts that were not automatically processed. The following deficiency was identified: · For four locations the firm did not perform any procedures to test the manual element of the control when cash receipts were not automatically applied. (AS 2201.39)

The firm selected for testing controls over accounts receivable at five of the issuer's locations including certain automated and manual controls related to the matching of cash receipts to the corresponding invoices and application of the receipts to the correct accounts receivable balances. For four of these locations the issuer changed from a manual cash application control to an automated cash application control during the first quarter of the year. The automated control included a manual element that used system-generated reports to identify investigate and apply cash receipts that were not automatically processed. The following deficiency was identified: · For one location the firm did not identify and test any controls that addressed whether cash receipts were matched to corresponding invoices and applied to the correct accounts receivable balances. (AS 2201.39)

The firm's procedures to test the existence and valuation of accounts receivable at these five locations included selecting a sample of customer invoices for testing using a sampling approach that was based on obtaining a certain level of audit evidence from its other substantive procedures and placing reliance on controls. The sample size the firm used was too small to provide sufficient appropriate audit evidence over accounts receivable because the firm's other substantive procedures did not provide the level of substantive evidence needed to support its sampling approach (AS 2315.16 .19 .23 and .23A).

The firm's procedures to test the existence and valuation of accounts receivable at these five locations included selecting a sample of customer invoices for testing using a sampling approach that was based on obtaining a certain level of audit evidence from its other substantive procedures and placing reliance on controls. The sample size the firm used was too small to provide sufficient appropriate audit evidence over accounts receivable because the procedures performed to test accounts receivable were designed based on a level of control reliance that was not supported due to the deficiencies in the firm's testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The issuer entered into contracts with customers and recognized revenue based on the contractual terms of each contract entered into its accounting system. The issuer also prepared credit notes for adjustments to revenue. The following deficiency was identified: · The firm selected for testing a control over revenue that consisted of management's review of a selection of customer contracts including their respective contractual terms. The firm did not sufficiently evaluate the specific review procedures that the control owner performed to review the contractual terms of the selected contracts because the firm's procedures were limited to management's review of only one term within the contracts. (AS 2201.42 and .44)

The issuer entered into contracts with customers and recognized revenue based on the contractual terms of each contract entered into its accounting system. The issuer also prepared credit notes for adjustments to revenue. The following deficiency was identified: · The firm selected for testing a control over revenue that consisted of management's review of a selection of customer contracts including their respective contractual terms. The firm identified deviations in the operation of this control but did not determine the effect of these deviations on the operating effectiveness of the control. (AS 2201.48)

The issuer entered into contracts with customers and recognized revenue based on the contractual terms of each contract entered into its accounting system. The issuer also prepared credit notes for adjustments to revenue. The following deficiency was identified: · The firm did not identify and test any controls over the entry of contract information including contractual terms into the accounting system that were used to recognize revenue. (AS 2201.39)

The issuer entered into contracts with customers and recognized revenue based on the contractual terms of each contract entered into its accounting system. The issuer also prepared credit notes for adjustments to revenue. The following deficiency was identified: · The firm selected for testing another control over revenue that consisted of management's review of credit notes. The firm identified deviations in the operation of this control but did not determine the effect of these deviations on the operating effectiveness of the control. (AS 2201.48)

The principal auditor instructed the firm to test a control that consisted of the issuer's quarterly review of the gross margin by product for certain revenue. 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 principal auditor instructed the firm to test a control that consisted of the issuer's quarterly review of the gross margin by product for certain revenue. The number of quarters selected for testing did not provide sufficient appropriate audit evidence because the firm did not test the number of quarters that it determined necessary. (AS 2201.46)

The firm's procedures to test the valuation of certain inventory included selecting a sample of inventory items for testing using a sampling approach that was based on obtaining a certain level of audit evidence from its other substantive procedures. The sample size the firm used was too small to provide sufficient appropriate audit evidence over this inventory because the firm's other substantive procedures did not provide the level of substantive evidence needed to support its sampling approach. (AS 2315.16 .19 .23 and .23A)

The firm's substantive procedures to test certain revenue included testing a sample of transactions. The sample size the firm used to perform these substantive procedures was too small to provide sufficient appropriate audit evidence because the firm did not take into account the relevant factors in determining its sample size including the relationship of the samples to the relevant audit objective and the characteristics of the population. (AS 2315.16 .19 .23 and .23A)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify certain of the deficiencies below. Among other procedures the principal auditor instructed the firm to (1) compare the contract terms of receivables acquired during the year to the contract summary to ensure that it provided a complete and accurate reflection of the contract details and (2) test the accuracy of key customer data in the component's customer collections system. The firm did not perform these substantive procedures as instructed by the principal auditor. (AS 2301.08)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify certain of the deficiencies below. The firm selected for testing certain controls over deposit liabilities that consisted of the issuer's reconciliation and review of deposit payment requests. The firm did not evaluate the specific review procedures that the control owners performed to ensure that deposits were not refunded incorrectly or fraudulently in the approval of withdrawal requests and to ensure the accuracy of the interest-bearing deposits account reconciliations. (AS 2201.42 and .44)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify certain of the deficiencies below. The firm's substantive procedures to test the existence and completeness of deposit liabilities included sending positive confirmation requests to a sample of customers to confirm the deposits that they made through an interim date. The firm communicated to the principal auditor that it had also examined support for customer account statements and proof of deposits in the accounting system. The following deficiency was identified: · The firm did not perform any substantive procedures to test withdrawal activity during the year. (AS 2301.08)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify certain of the deficiencies below. The firm's substantive procedures to test the existence and completeness of deposit liabilities included sending positive confirmation requests to a sample of customers to confirm the deposits that they made through an interim date. The firm communicated to the principal auditor that it had also examined support for customer account statements and proof of deposits in the accounting system. The following deficiency was identified: · The firm did not perform any procedures to extend its conclusions regarding the existence and completeness of deposit liabilities from the interim date in which the audit procedures were performed to year-end. (AS 2301.45)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify certain of the deficiencies below. The firm's substantive procedures to test the existence and completeness of deposit liabilities included sending positive confirmation requests to a sample of customers to confirm the deposits that they made through an interim date. The firm communicated to the principal auditor that it had also examined support for customer account statements and proof of deposits in the accounting system. The following deficiency was identified: · The firm did not perform procedures to test or test any controls over the completeness of the report from which it selected its samples for testing beyond reviewing the parameters used to generate the report. (AS 1105.10)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify certain of the deficiencies below. The firm's substantive procedures to test the existence and completeness of deposit liabilities included sending positive confirmation requests to a sample of customers to confirm the deposits that they made through an interim date. The firm communicated to the principal auditor that it had also examined support for customer account statements and proof of deposits in the accounting system. The following deficiency was identified: · The firm did not examine the support for customer statements and proof of deposits in the accounting system as it had communicated to the principal auditor. (AS 2301.08)

The firm's internal inspection program had inspected this audit and reviewed these areas but did not identify certain of the deficiencies below. The firm's substantive procedures to test the existence and completeness of deposit liabilities included sending positive confirmation requests to a sample of customers to confirm the deposits that they made through an interim date. The firm communicated to the principal auditor that it had also examined support for customer account statements and proof of deposits in the accounting system. The following deficiency was identified: · The sample size the firm used in its substantive procedures to test deposit liabilities 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 sent positive confirmation requests via email to a sample of customers as part of its substantive testing of accounts receivable and the email address for each customer was provided by the issuer. The firm received the responses for all but one of the confirmation requests sent via email. The firm did not consider performing procedures to address the risks associated with electronic responses such as verifying the source of the confirmation responses. (AS 2310.29)

The firm's internal inspection program had inspected this audit and reviewed the Long-Lived Assets area but did not identify certain of the deficiencies below related to this area. The issuer utilized internal specialists (company's employed specialists) including reserve engineers to estimate its proved and expected oil and gas reserves (“reserve estimates”). Proved reserves were used in the calculation of depreciation depletion and amortization of production plants and oil and gas assets and expected reserve estimates were used in the impairment analyses of production plants and oil and gas assets including assets under development. The issuer also engaged an external specialist (company's engaged specialist) to evaluate its proved reserve estimates. The firm selected for testing certain controls over the reserve estimates that consisted of the issuer's (1) review of changes to the expected future production volumes (“production profile”) (2) review of key assumptions within the remaining expected production profile estimates (3) assessment of deviations between the expected reserve estimates the company's employed specialists developed and the expected reserve estimates the company's engaged specialist developed (4) review of changes in proved developed and undeveloped reserves (5) review of the proved reserve estimates volumetric inputs in the standardized measure of value and (6) review of the final proved reserve estimates. The following deficiency was identified: · The firm did not identify and test any controls over the accuracy and completeness of certain non-financial data the issuer produced and/or the evaluation of the relevance and reliability of certain non-financial data from external sources that was (1) used in developing the reserves production profiles and/or standardized measure of value (2) used in the operation of certain of the above controls and (3) provided to the company's engaged specialist to evaluate the issuer's reserve estimates. (AS 2201.39) · The firm did not identify and test any controls over the reasonableness of the methods and assumptions the company's employed specialists used to develop the reserve estimates. (AS 2201.39) · The firm did not evaluate the specific review procedures that the control owners performed to evaluate the accuracy and completeness of the underlying non-financial data used in developing the reserves production profiles and/or standardized measure of value used in the operation of certain of the above controls. (AS 2201.42 and .44)

The firm's internal inspection program had inspected this audit and reviewed the Long-Lived Assets area but did not identify certain of the deficiencies below related to this area. The issuer utilized internal specialists (company's employed specialists) including reserve engineers to estimate its proved and expected oil and gas reserves (“reserve estimates”). Proved reserves were used in the calculation of depreciation depletion and amortization of production plants and oil and gas assets and expected reserve estimates were used in the impairment analyses of production plants and oil and gas assets including assets under development. The issuer also engaged an external specialist (company's engaged specialist) to evaluate its proved reserve estimates. The firm selected for testing certain controls over the reserve estimates that consisted of the issuer's (1) review of changes to the expected future production volumes (“production profile”) (2) review of key assumptions within the remaining expected production profile estimates (3) assessment of deviations between the expected reserve estimates the company's employed specialists developed and the expected reserve estimates the company's engaged specialist developed (4) review of changes in proved developed and undeveloped reserves (5) review of the proved reserve estimates volumetric inputs in the standardized measure of value and (6) review of the final proved reserve estimates. The following deficiency was identified: · The firm did not identify and test any controls over the accuracy and completeness of certain non-financial data the issuer produced and/or the evaluation of the relevance and reliability of certain non-financial data from external sources that was (1) used in developing the reserves production profiles and/or standardized measure of value (2) used in the operation of certain of the above controls and (3) provided to the company's engaged specialist to evaluate the issuer's reserve estimates. (AS 2201.39) · The firm did not identify and test any controls over the reasonableness of the methods and assumptions the company's employed specialists used to develop the reserve estimates. (AS 2201.39) · The firm did not evaluate the specific review procedures that the control owners performed to evaluate the accuracy and completeness of the underlying non-financial data used in developing the reserves production profiles and/or standardized measure of value used in the operation of certain of the above controls. (AS 2201.42 and .44)

The firm's internal inspection program had inspected this audit and reviewed the Long-Lived Assets area but did not identify certain of the deficiencies below related to this area. The issuer utilized internal specialists (company's employed specialists) including reserve engineers to estimate its proved and expected oil and gas reserves (“reserve estimates”). Proved reserves were used in the calculation of depreciation depletion and amortization of production plants and oil and gas assets and expected reserve estimates were used in the impairment analyses of production plants and oil and gas assets including assets under development. The issuer also engaged an external specialist (company's engaged specialist) to evaluate its proved reserve estimates. The firm selected for testing certain controls over the reserve estimates that consisted of the issuer's (1) review of changes to the expected future production volumes (“production profile”) (2) review of key assumptions within the remaining expected production profile estimates (3) assessment of deviations between the expected reserve estimates the company's employed specialists developed and the expected reserve estimates the company's engaged specialist developed (4) review of changes in proved developed and undeveloped reserves (5) review of the proved reserve estimates volumetric inputs in the standardized measure of value and (6) review of the final proved reserve estimates. The following deficiency was identified: · The firm did not identify and test any controls over the accuracy and completeness of certain non-financial data the issuer produced and/or the evaluation of the relevance and reliability of certain non-financial data from external sources that was (1) used in developing the reserves production profiles and/or standardized measure of value (2) used in the operation of certain of the above controls and (3) provided to the company's engaged specialist to evaluate the issuer's reserve estimates. (AS 2201.39) · The firm did not identify and test any controls over the reasonableness of the methods and assumptions the company's employed specialists used to develop the reserve estimates. (AS 2201.39) · The firm did not evaluate the specific review procedures that the control owners performed to evaluate the accuracy and completeness of the underlying non-financial data used in developing the reserves production profiles and/or standardized measure of value used in the operation of certain of the above controls. (AS 2201.42 and .44)

The firm's internal inspection program had inspected this audit and reviewed the Long-Lived Assets area but did not identify certain of the deficiencies below related to this area. The issuer utilized internal specialists (company's employed specialists) including reserve engineers to estimate its proved and expected oil and gas reserves (“reserve estimates”). Proved reserves were used in the calculation of depreciation depletion and amortization of production plants and oil and gas assets and expected reserve estimates were used in the impairment analyses of production plants and oil and gas assets including assets under development. The issuer also engaged an external specialist (company's engaged specialist) to evaluate its proved reserve estimates. The firm's approach for substantively testing the reserve estimates was to test the issuer's process. The firm did not perform sufficient procedures to test the reserve estimates because the firm did not: · Perform procedures to test or test any controls over the accuracy and completeness of certain non-financial data the issuer prepared and the company's employed specialists used to develop the reserve estimates; (AS 1105.A8a)

The firm's internal inspection program had inspected this audit and reviewed the Long-Lived Assets area but did not identify certain of the deficiencies below related to this area. The issuer utilized internal specialists (company's employed specialists) including reserve engineers to estimate its proved and expected oil and gas reserves (“reserve estimates”). Proved reserves were used in the calculation of depreciation depletion and amortization of production plants and oil and gas assets and expected reserve estimates were used in the impairment analyses of production plants and oil and gas assets including assets under development. The issuer also engaged an external specialist (company's engaged specialist) to evaluate its proved reserve estimates. The firm's approach for substantively testing the reserve estimates was to test the issuer's process. The firm did not perform sufficient procedures to test the reserve estimates because the firm did not: · Evaluate the relevance and reliability of external non-financial data the company's employed specialists used to develop the reserve estimates; (AS 1105.A8a)

The firm's internal inspection program had inspected this audit and reviewed the Long-Lived Assets area but did not identify certain of the deficiencies below related to this area. The issuer utilized internal specialists (company's employed specialists) including reserve engineers to estimate its proved and expected oil and gas reserves (“reserve estimates”). Proved reserves were used in the calculation of depreciation depletion and amortization of production plants and oil and gas assets and expected reserve estimates were used in the impairment analyses of production plants and oil and gas assets including assets under development. The issuer also engaged an external specialist (company's engaged specialist) to evaluate its proved reserve estimates. The firm's approach for substantively testing the reserve estimates was to test the issuer's process. The firm did not perform sufficient procedures to test the reserve estimates because the firm did not: · Evaluate the reasonableness of the significant assumptions developed by the issuer and the company's employed specialists that were used by the company's employed specialists to develop the reserve estimates; (AS 1105.A8b; AS 2501.16) and

The firm's internal inspection program had inspected this audit and reviewed the Long-Lived Assets area but did not identify certain of the deficiencies below related to this area. The issuer utilized internal specialists (company's employed specialists) including reserve engineers to estimate its proved and expected oil and gas reserves (“reserve estimates”). Proved reserves were used in the calculation of depreciation depletion and amortization of production plants and oil and gas assets and expected reserve estimates were used in the impairment analyses of production plants and oil and gas assets including assets under development. The issuer also engaged an external specialist (company's engaged specialist) to evaluate its proved reserve estimates. The firm's approach for substantively testing the reserve estimates was to test the issuer's process. The firm did not perform sufficient procedures to test the reserve estimates because the firm did not: · Evaluate whether the methods the company's employed specialists used to develop the reserve estimates were appropriate under the circumstances taking into account the requirements of the applicable financial reporting framework. (AS 1105.A8c)

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

For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing controls over certain inventory that consisted of the issuer's review of the monthly weighted average cost per unit as computed by the issuer's IT system through an automated control that was used to record the value of inventory. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the weighted average cost per unit. Further the firm did not test the configuration or programming of the automated control or perform other procedures that would have provided sufficient appropriate audit evidence that the control was designed and operating effectively. (AS 2201.42 and .44)

For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing a control over the determination and recording of a slow-moving inventory provision for certain inventory which included an automated control that calculated the provision. The firm did not test the configuration or programming of the automated control or perform other procedures that would have provided sufficient appropriate audit evidence that the control was designed and operating effectively. (AS 2201.42 and .44)

For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing a control over the determination and recording of a slow-moving inventory provision for certain inventory which included an automated control that calculated the provision. The firm did not identify and test any controls over the accuracy and completeness of a system-generated report that was used in the operation of this control. (AS 2201.39)

For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing a control over the determination and recording of a slow-moving inventory provision for certain inventory which included an automated control that calculated the provision. The firm did not perform any substantive procedures to test or in the alternative test controls over the accuracy of the system-generated report which it used to evaluate the reasonableness of the slow-moving inventory provision. (AS 1105.10)

For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm did not perform any substantive procedures to test the cost of certain inventory including the allocation of direct labor and overhead costs beyond comparing the cost of the inventory at year end to cost of the inventory at the end of the prior year. (AS 2301.08)

For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm did not perform any substantive procedures to test or with respect to change management to sufficiently test controls over the accuracy and completeness of information generated from the issuer's IT system that was used to substantively test the cost of certain inventory. (AS 1105.10)

For inventory which was affected by the audit deficiencies related to change management the following additional deficiencies were identified: - The firm selected for testing a control over the determination and recording of an obsolescence provision for certain inventory that consisted of the issuer's review of a system-generated provision report and approval of related adjustments to inventory. The firm did not identify and test any controls over the (1) data input into the issuer's IT system and used to calculate the provision and (2) accuracy and completeness of the system-generated report that was used in the operation of the control. (AS 2201.39)

The issuer used an information-technology (IT) system to initiate process and record transactions related to certain revenue accounts receivable and inventory. In its testing over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT system. With respect to change management: - The firm selected for testing certain change management controls that consisted of (1) testing of changes in a test environment and (2) approval of these changes prior to their implementation into the production environment. The firm did not evaluate the procedures that the control owners performed to evaluate the appropriateness of certain types of changes made to the IT system or otherwise identify and test other controls to address the change management risks. (AS 2201.42 and .44)