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The issuer estimated the general reserve component of the ALL using the following significant assumptions: (1) loan segmentation (2) probability of default (“PD”) (3) loss given default (“LGD”) and (4) loan risk ratings (“LRR”). The issuer used a model to derive the PD and LGD assumptions using current and historical loan data (“loan data”) contained in two data warehouses. The following deficiencies were identified: · The firm did not identify and test any controls over the accuracy of the loan data contained in the two data warehouses. (AS 2201.39)

The issuer estimated the general reserve component of the ALL using the following significant assumptions: (1) loan segmentation (2) probability of default (“PD”) (3) loss given default (“LGD”) and (4) loan risk ratings (“LRR”). The issuer used a model to derive the PD and LGD assumptions using current and historical loan data (“loan data”) contained in two data warehouses. The following deficiencies were identified: · The firm selected for testing a control that included (1) the issuer's review of the LRRs assigned to loans meeting certain criteria and (2) procedures to monitor whether the LRRs for these loans were updated within the time frame established for the control. 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 estimated the general reserve component of the ALL using the following significant assumptions: (1) loan segmentation (2) probability of default (“PD”) (3) loss given default (“LGD”) and (4) loan risk ratings (“LRR”). The issuer used a model to derive the PD and LGD assumptions using current and historical loan data (“loan data”) contained in two data warehouses. The following deficiencies were identified: · In addition the firm did not test the aspect of this control that addressed the appropriateness of the time frame established for the control for requiring updates to the LRRs. (AS 2201.42 and .44)

The issuer estimated the general reserve component of the ALL using the following significant assumptions: (1) loan segmentation (2) probability of default (“PD”) (3) loss given default (“LGD”) and (4) loan risk ratings (“LRR”). The issuer used a model to derive the PD and LGD assumptions using current and historical loan data (“loan data”) contained in two data warehouses. The following deficiencies were identified: · In its substantive testing of the ALL the firm did not test the reasonableness of the loan segmentation PD and LGD assumptions. (AS 2501.11)

As a result of our inspection the firm performed additional procedures related to the deficiencies in controls over revenue and inventory discussed above and requested that the issuer reevaluate these controls. As a result of this reevaluation the issuer identified a material weakness related to the aggregation of control deficiencies over the issuer's information technology (“IT”) systems that had not been previously identified. The firm modified its report on the effectiveness of the issuer's ICFR to include this additional material weakness. The firm relied on information in reports generated from these general ledger systems in performing its substantive procedures over revenue and inventory but did not test the completeness of the information in certain of these reports beyond comparing certain amounts in these reports to the general ledger systems. (AS 1105.10)

During the year the issuer acquired a business. The firm selected for testing various controls over the accounting for the business combination which included the issuer's reviews of the significant assumptions used in the valuation of certain assets acquired and liabilities assumed. In testing the aspects of these controls related to the review of these assumptions 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 sample sizes the firm used in certain of its substantive procedures to test certain assets acquired and liabilities assumed 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 recorded the fair value for available-for-sale (“AFS”) and held-to-maturity (“HTM”) debt securities based on the prices it received from an external pricing service. The firm selected for testing a control that consisted of the issuer's comparison for a selection of securities from various security categories of the prices it received from the external pricing service to prices it obtained from other sources and evaluation of any pricing differences that exceeded monetary thresholds. The firm did not evaluate whether the control was designed to address the risks of material misstatement presented by the different risk characteristics inherent in the population of securities in each category not subject to the control given the selection method applied. (AS 2201.42)

The sample sizes the firm used in certain of its substantive procedures to test the valuation of the AFS and HFM debt securities 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 developed the qualitative component of the general reserve of the ALL by assigning risk-rating factors which it weighted using certain judgmental assumptions to qualitative considerations such as delinquency trends economic and business conditions and other external factors used in its calculation. The following deficiencies were identified: · With respect to controls over the qualitative component of the general reserve the firm selected for testing controls that consisted of reviews of trends in various qualitative considerations the issuer used to determine the risk-rating factors. The firm did not identify and test any controls that addressed the appropriateness of the risk-rating factors and weightings that were assigned to each of the qualitative considerations. (AS 2201.39)

The issuer developed the qualitative component of the general reserve of the ALL by assigning risk-rating factors which it weighted using certain judgmental assumptions to qualitative considerations such as delinquency trends economic and business conditions and other external factors used in its calculation. The following deficiencies were identified: · With respect to its substantive procedures over the qualitative component of the general reserve the firm did not evaluate the appropriateness of the risk-rating factors and weightings that were assigned to each of the qualitative considerations. (AS 2501.11)

The issuer recorded the fair value for AFS securities based on the prices it received from an external pricing service. The firm selected for testing a control that consisted of (1) comparing the recorded fair values to prices obtained from another pricing service for a sample of securities selected from certain categories of securities and (2) the analysis of pricing differences that exceeded an established threshold. The firm did not evaluate whether the control was designed to address the risks of material misstatement presented by the population of securities not subject to the control given the selection method applied by the issuer and the different valuation methods used by the issuer's external pricing services to value the securities. (AS 2201.42)

The sample sizes the firm used in certain of its substantive procedures to test the valuation of the AFS securities 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)

During the year the issuer acquired a business. The firm selected for testing a control over the valuation of certain acquired loans that consisted of the issuer's review of the significant assumptions that the issuer used in the valuation of these loans including the discount rate. The firm did not evaluate the specific review procedures the control owner performed to review two important components the issuer used to determine the discount rate. (AS 2201.42 and .44)

For certain revenue the issuer's system initiated revenue recognition upon the issuer's review and input of shipment information into the system. The following deficiencies were identified: · The firm selected for testing an automated control over this revenue that was designed to record revenue once the shipment information was manually entered into the issuer's system. The firm did not test the configuration of the automated control or perform other procedures to obtain sufficient appropriate audit evidence that the automated control was operating as designed. (AS 2201.42 and .44)

In addition to the control deficiencies discussed above the firm identified control deficiencies in the issuer's controls over trade payables that it had selected for testing and concluded that these deficiencies in the aggregate represented a significant deficiency. The firm did not sufficiently evaluate whether the deficiencies represented a material weakness because the firm did not evaluate the magnitude of potential misstatements resulting from these control deficiencies. (AS 2201.62 and .63)

For certain revenue the issuer's system initiated revenue recognition upon the issuer's review and input of shipment information into the system. The following deficiencies were identified: In addition the firm did not identify and test any controls over the issuer's review of the shipment information that was manually entered into the issuer's system. (AS 2201.39)

For certain revenue the issuer's system initiated revenue recognition upon the issuer's review and input of shipment information into the system. The following deficiencies were identified: · The sample sizes the firm used in certain of its substantive procedures to test this 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 performed daily cycle counts of inventory but designed its counts to exclude a portion of inventory from the daily cycle counts. In evaluating the design of the cycle-count control the firm did not assess the effect of the issuer excluding this portion of inventory on the control's ability to effectively prevent or detect a material misstatement. (AS 2201.42)

During the year the issuer entered into transactions including an acquisition which resulted in the recording of the fair value of investments. The firm selected for testing investments that met specific criteria. The firm did not perform any substantive procedures to test the portion of investments that did not meet these criteria. (AS 1105.27)

The firm did not perform procedures beyond inquiry to evaluate significant differences it identified when performing certain comparisons to test the reasonableness of certain assumptions underlying the cash-flow forecasts that the issuer used to determine the fair value of the investments discussed above. (AS 2502.26 .28 .31 and .36)

In addition the firm did not test the accuracy and completeness of certain data used in one of the comparisons. (AS 1105.10)

Certain inventory held by the issuer in several locations was subject to cycle counts. The following deficiencies were identified: · The firm did not identify and test any controls over the issuer's monitoring of the results of the cycle counts to assess whether its perpetual inventory records were reliable. (AS 2201.39)

Certain inventory held by the issuer in several locations was subject to cycle counts. The following deficiencies were identified: · For inventory at certain of these locations the firm identified deficiencies in certain controls over the issuer's cycle-count program related to whether sufficient inventory items were counted with sufficient frequency in accordance with the issuer's cycle-count program. The firm identified and tested compensating controls that it believed mitigated these deficiencies. The firm did not identify that these compensating controls did not address whether sufficient inventory items were counted with sufficient frequency in accordance with the issuer's cycle-count program. (AS 2201.68)

Certain inventory held by the issuer in several locations was subject to cycle counts. The following deficiencies were identified: · For another one of these locations the issuer used an inventory management system in performing its cycle counts. The firm did not identify and test controls over the accuracy and completeness of the cycle-count selection reports generated by this system and used by the issuer in the performance of the cycle counts at this location. (AS 2201.39)

Certain inventory held by the issuer in several locations was subject to cycle counts. The following deficiencies were identified: · Due to the deficiencies discussed above the firm's testing of controls did not provide 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)

For all three business units the firm selected for testing an automated control over the pricing of revenue transactions within the revenue systems. Pricing for many cases was based on the issuer's costs. The firm did not evaluate whether this control was appropriately configured to operate over each scenario contained in customer contracts. (AS 2201.42 and .44)

During the year the issuer acquired a business. The firm selected for testing controls over the accounting for the business combination which included the issuer's reviews of the data and significant assumptions that the issuer used in the valuation of certain obligations assumed in this acquisition. 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)

In its substantive testing the firm did not evaluate the reasonableness of the significant assumptions underlying the fair values of the obligations assumed. (AS 2502.26 and .28)

In addition the firm did not test the accuracy and completeness of data used to determine the fair values of these obligations assumed. (AS 2502.26 .28 and .39)

During the year the issuer acquired a business. The firm selected for testing a control that included the issuer's review of the significant assumptions used in the valuation of the intangible assets acquired in this transaction. 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 firm performed substantive procedures to evaluate the significant assumptions underlying the forecasts the issuer used in the valuation of the acquired intangible assets but did not obtain sufficient appropriate audit evidence related to the issuer's ability to carry out its cost-saving strategies to achieve these forecasts. (AS 2502.26 .28 .31 and .36)

The firm's testing of controls for inventory held at certain locations consisted primarily of testing an entity-level control that involved the issuer's reviews of regional and component-level income statements and balance sheets. The firm did not evaluate the review procedures that the control owner performed including the criteria that the control owner used to identify items for follow up and whether those items were appropriately resolved with respect to the component-level financial information. (AS 2201.42 and .44)

Based on the firm's reliance on this entity-level control which was not supported due to the deficiency discussed above the firm limited its substantive procedures to test this inventory to various analytical procedures. These analytical procedures as designed provided little or no substantive evidence. (AS 2301.08)

For loans that the issuer assessed collectively for impairment the issuer estimated the ALL using a model that consisted of quantitative and qualitative components. The issuer developed the qualitative component of the ALL by applying certain qualitative factors to each of its classes of loans. The firm selected for testing a control that consisted of a committee's review of the ALL including the qualitative factors. The firm did not evaluate the review procedures that the control owners performed to evaluate the qualitative factors 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 data generated by an IT system including data related to revenue and inventory in the financial statement consolidation process. The firm selected for testing a control over the financial statement consolidation process but did not identify and test any controls over the accuracy and completeness of the data and reports generated by this system and used in the operation of the control. (AS 2201.39)

During the year the issuer acquired a business. The firm selected for testing a control over the accounting for this business combination which included the issuer's review of the significant assumptions including forecasted revenue and EBITDA margins that the issuer used in the valuation of the acquired intangible assets. The firm did not evaluate the review procedures that the control owners performed to assess the reasonableness of the forecasted revenue and EBITDA margins 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)

In addition the firm did not identify and test any controls that addressed whether the revenue systems appropriately applied the item costs that were used to generate customer sales invoices. (AS 2201.39)

For one of the three business units the firm selected a control that consisted of the manual resolution of exceptions identified through an automated process to determine whether daily sales had shipped. The firm did not (1) test the configuration of the automated control that identified exceptions and (2) identify and test the aspects of the control related to the manual steps that the control owners performed to resolve the identified exceptions. (AS 2201.42 and .44)

For another one of the three business units the firm selected for testing controls that consisted of management's reviews of a sample of changes made to the pricing information within the revenue system. The firm did not evaluate whether the sample of changes subject to the reviews was sufficient to identify any misstatements that in the aggregate could be material. (AS 2201.42)

For all three business units the firm's substantive procedures to test revenue consisted of testing samples of transactions. In performing its testing of the selected transactions the firm did not evaluate whether the selling prices that the issuer used to record revenue agreed with the terms in the customer contracts. (AS 2301.08)

The firm did not identify and test any controls over this revenue. (AS 2201.39)

The issuer used multiple information-technology ('IT') systems to initiate process and record transactions related to certain revenue and property plant and equipment. The firm tested information technology general controls ('ITGCs') for these IT systems. The following deficiencies were identified: · The firm did not test or in the alternative test any controls over the accuracy and completeness of the system-generated reports that it used to select its sample for testing controls over change management. (AS 1105.10)

The issuer used multiple information-technology ('IT') systems to initiate process and record transactions related to certain revenue and property plant and equipment. The firm tested information technology general controls ('ITGCs') for these IT systems. The following deficiencies were identified: · The firm tested certain automated and IT-dependent manual controls that used data from these IT systems. As a result of the deficiencies in the firm's testing of ITGCs discussed above the firm's testing of these automated and IT-dependent manual controls was not sufficient. (AS 2201.46)

The issuer used multiple information-technology ('IT') systems to initiate process and record transactions related to certain revenue and property plant and equipment. The firm tested information technology general controls ('ITGCs') for these IT systems. The following deficiencies were identified: · The firm used information that was produced by these IT systems in performing certain of its substantive procedures to test revenue property plant and equipment and related manual journal entries but did not have a basis to rely on this information due to the deficiencies in the firm's testing of ITGCs discussed above. The firm did not test or in the alternative test any other controls over the accuracy and completeness of this information. (AS 1105.10)

The issuer processed revenue for one of its business units using two billing systems. The firm selected for testing various automated controls related to the revenue recorded by both systems. The firm did not test the configuration of the automated controls or perform other procedures that would have provided sufficient appropriate audit evidence that the automated controls were designed and operating effectively. (AS 2201.42 .44 and .B9)

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 deficiencies in the firm's testing of ITGCs discussed and the deficiency in the firm's control testing related to certain revenue discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The issuer incurred costs related to property plant and equipment including costs of internally-developed software; certain of these costs were expensed and others were capitalized. The firm did not identify and test any controls that addressed whether (1) the non-software costs incurred for individual projects and (2) costs of internally-developed software were appropriately expensed or capitalized. (AS 2201.39)

The issuer assigned estimated useful lives to each type of property plant and equipment. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of the estimated useful lives. 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 issuer assigned estimated useful lives to each type of property plant and equipment. The following deficiencies were identified: · The firm did not perform sufficient substantive procedures to evaluate the reasonableness of the estimated useful lives because its procedures were limited to reading the useful life study prepared by an external specialist in a previous year and inspecting the issuer's depreciation schedule. (AS 2501.11)