Explorer

The sample size the firm used in certain of its substantive procedures to test revenue 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 did not perform substantive procedures to test or sufficiently test controls over the completeness of a system-generated report that the firm used in its substantive testing of revenue transactions. (AS 1105.10)

The firm's approach for substantively testing revenue consisted primarily of performing a software-assisted analysis to test the relationships among revenue accounts receivable and cash receipts. The firm's approach to addressing the reliability of the audit evidence obtained from this type of analysis was dependent upon the firm's testing of certain data underlying the analysis. The firm did not sufficiently test this underlying data because it did not select its sample from the entire population of data that was used in this analysis. (AS 1105.10)

The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to two types of revenue and the related accounts receivable deferred revenue related to one of these types of revenue and/or investment securities. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. As a result of 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 one type of revenue and the related deferred revenue which were affected by the audit deficiencies the following deficiencies related to the firm's testing of controls were identified: · The firm selected for testing automated controls over customer set up modification and credit approval. The firm did not test the aspects of these controls related to the timing of approvals and the established credit limits. Further the firm's testing of the aspects of the controls related to possible override was not sufficient because the firm's procedures were limited to inquiry. (AS 2201.42 and .44)

For one type of revenue and the related deferred revenue which were affected by the audit deficiencies the following deficiencies related to the firm's testing of controls were identified: · The firm selected for testing automated controls over contract approval and product delivery. The firm's testing of these controls was not sufficient because the firm's procedures did not address certain types of contract scenarios and delivery types. (AS 2201.42 and .44)

For one type of revenue and the related deferred revenue which were affected by the audit deficiencies the following deficiencies related to the firm's testing of controls were identified: · The firm selected for testing certain IT-dependent manual controls but did not identify and test any controls over the accuracy and completeness of certain data or reports that the control owners used in the operations of these controls. (AS 2201.39)

For one type of revenue and the related deferred revenue which were affected by the audit deficiencies the following deficiencies related to the firm's testing of controls were identified: · For one control the firm did not perform any substantive procedures to test or in the alternative test any controls over the completeness of the lists from which it selected items for testing. (AS 1105.10)

For one type of revenue and the related deferred revenue which were affected by the audit deficiencies the following deficiencies related to the firm's testing of controls were identified: · The firm's testing of certain other IT-dependent manual controls was not sufficient because it did not sufficiently test the queries or programming the issuer used to generate certain data or reports that the control owners used in the operations of these controls. (AS 2201.42 and .44)

For one type of revenue and the related deferred revenue which were affected by the audit deficiencies the following deficiencies related to the firm's testing of controls were identified: · For certain other IT-dependent manual controls the firm tested the accuracy and completeness of certain reports used in the operation of these controls in the issuer's IT testing environment rather than in the production environment. The firm's testing was not sufficient because the firm did not perform procedures to determine whether the testing environment was consistent with the production environment. (AS 2201.44)

As a result of the firm's control testing deficiencies discussed above the firm did not perform sufficient substantive procedures for two types of revenue and the related accounts receivable and for deferred revenue related to one of these types of revenue as follows: · The firm's substantive procedures to test these accounts included analytical procedures. The firm used data from the issuer's systems to develop its expectations but did not test or sufficiently test controls over the accuracy and completeness of these data. Further the firm established its thresholds for investigating differences based on a level of control reliance that was not supported due to the deficiencies in the firm's testing of controls. As a result the analytical procedures 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 2305.16 and 20)

As a result of the firm's control testing deficiencies discussed above the firm did not perform sufficient substantive procedures for two types of revenue and the related accounts receivable and for deferred revenue related to one of these types of revenue as follows: · The firm performed substantive procedures to test certain arrangements with multiple performance obligations. The firm's testing of the reasonableness of the relative stand-alone selling prices the issuer used to allocate this revenue to the performance obligations was not sufficient because the firm did not test or sufficiently test controls over the accuracy and completeness of the data it used in its testing. (AS 1105.10)

For one of these two types of revenue the firm developed its expectation for one of its analytical procedures using data derived from the recorded amounts of revenue. The firm did not evaluate whether this data was sufficiently reliable for purposes of achieving its audit objectives. (AS 2305.16)

The issuer managed a portion of its investment securities portfolio and used external parties to manage the remaining portion. The issuer used one service organization to perform recordkeeping and processing of all investment transactions and a second service organization to maintain custody of the overall portfolio. With respect to the custodial service organization the firm obtained a service auditor's report and identified certain complementary user controls that the service auditor's report described as necessary. The firm did not perform any procedures to evaluate whether the issuer had implemented these controls. (AS 2201.39 and .B22)

The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to two types of revenue and the related accounts receivable deferred revenue related to one of these types of revenue and/or investment securities. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. With respect to change management: · For one IT system the firm selected for testing controls over managing changes to the production environment. The firm did not identify and test any controls over the accuracy and completeness of certain access logs used in the operation of these controls. (AS 2201.39)

The issuer managed a portion of its investment securities portfolio and used external parties to manage the remaining portion. The issuer used one service organization to perform recordkeeping and processing of all investment transactions and a second service organization to maintain custody of the overall portfolio. With respect to information received from the recordkeeping service provider the following deficiencies were identified: · The firm did not identify and test any controls over the relevance and reliability of the pricing information the issuer received from this service organization and used to record the fair values of the investment securities the issuer managed. (AS 2201.39)

The issuer managed a portion of its investment securities portfolio and used external parties to manage the remaining portion. The issuer used one service organization to perform recordkeeping and processing of all investment transactions and a second service organization to maintain custody of the overall portfolio. With respect to information received from the recordkeeping service provider the following deficiencies were identified: · The firm selected for testing a control over the relevance and reliability of the pricing information the issuer received from this service organization related to the portion of the portfolio managed by external parties. This control included the issuer's comparison of certain pricing information it received from the service organization to information it received from the external parties. The firm did not evaluate the specific review procedures the control owner performed to assess the relevance and reliability of the pricing information received from the external parties. (AS 2201.42 and .44)

The sample sizes the firm used in certain of its substantive procedures to test the valuation of investment 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. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm did not perform any substantive procedures to test one type of revenue. (AS 2301.08)

The firm's approach for substantively testing another type of revenue consisted primarily of performing a software-assisted analysis to test the relationships among revenue accounts receivable and cash receipts. The reliability of the audit evidence obtained from this analysis was dependent upon the firm's testing of the cash receipts data underlying the analysis. The firm did not sufficiently test this underlying data because it did not evaluate whether it was appropriate to include in the analysis certain cash receipts not related to the revenue being tested. (AS 1105.10)

The firm identified that the issuer's accounting for and presentation and disclosure of certain long-lived assets was not in conformity with FASB ASC Topic 205 Presentation of Financial Statements and FASB ASC Topic 360 Property Plant and Equipment. The firm did not sufficiently accumulate and evaluate the effect of this accounting because it limited its evaluation to assessing the effect on certain financial statement line items and disclosures but did not evaluate certain other financial statement line items and disclosures that were also affected by the same accounting. (AS 2810.10 .17 .30 and .31)

The firm selected for testing a control that consisted of the review of certain debt issuances and modifications. The firm did not perform any substantive procedures to test or in the alternative test any controls over the completeness of the population of debt issuances and modifications that the firm used to make its selections to test this control. (AS 1105.10)

The firm sent positive confirmation requests to the issuer's lenders for a sample of debt. For certain confirmations that were returned with exceptions the firm did not evaluate the nature of those exceptions. (AS 2310.33)

The issuer used multiple IT systems to initiate process and/or record transactions related to certain revenue deferred revenue goodwill and/or intangible assets. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. As a result of the deficiencies in the firm's testing of ITGCs the firm's testing of these automated and IT-dependent manual controls was not sufficient. (AS 2201.46)

The issuer used multiple IT systems to initiate process and/or record transactions related to certain revenue deferred revenue goodwill and/or intangible assets. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. With respect to segregation of duties: · For certain IT systems the firm did not identify and test any controls that addressed the risk related to whether users with the ability to develop changes also had the ability to implement these changes. (AS 2201.39)

The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to two types of revenue and the related accounts receivable deferred revenue related to one of these types of revenue and/or investment securities. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. With respect to change management: · For one IT system the firm selected for testing controls over managing changes to the production environment. The firm did not identify and test any controls that were designed to address the risk related to unapproved changes being made to this environment. (AS 2201.39)

The issuer used multiple IT systems to initiate process and/or record transactions related to certain revenue deferred revenue goodwill and/or intangible assets. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. With respect to segregation of duties: · For certain other IT systems the firm selected for testing a control that consisted of the review of segregation of duties. The firm did not test the aspect of the control that addressed whether certain users with the ability to implement changes also had the ability to develop those changes. (AS 2201.42 and .44)

The issuer used multiple IT systems to initiate process and/or record transactions related to certain revenue deferred revenue goodwill and/or intangible assets. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. With respect to change management: · For certain IT systems the firm selected for testing an automated control over change management. The firm did not sufficiently test the operating effectiveness of this control because the firm did not test whether the control operated as designed for each processing alternative. (AS 2201.44)

The issuer used multiple IT systems to initiate process and/or record transactions related to certain revenue deferred revenue goodwill and/or intangible assets. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. With respect to change management: · For certain IT systems the firm did not test or in the alternative test any controls over the completeness of the system-generated reports that it used to make its selections for testing certain controls over change management. (AS 1105.10)

As a result of the firm's ITGC testing deficiencies the firm did not perform sufficient other audit procedures as follows: · For certain revenue deferred revenue goodwill and intangible assets the firm did not perform sufficient substantive procedures to test or sufficiently test controls over the accuracy and completeness of certain system-generated data or reports (1) the firm used to make its selections to test certain controls; (2) the firm used in its substantive testing including analytical procedures; or (3) the company's specialists used. (AS 1105.10 and .A8a; AS 2305.16)

As a result of the firm's ITGC testing deficiencies the firm did not perform sufficient other audit procedures as follows: · The firm's substantive procedures to test certain revenue and deferred revenue included substantive analytical procedures. The firm established its thresholds 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 thresholds 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)

As a result of the firm's ITGC testing deficiencies the firm did not perform sufficient other audit procedures as follows: · The sample size the firm used in certain of its substantive procedures to test certain deferred revenue 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. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm selected for testing a control that consisted of the issuer's review of the accounting for and disclosure of a reverse merger. The firm did not (1) evaluate the specific review procedures that the control owner performed to assess whether all relevant terms of the transaction agreements were considered and (2) identify that the control owner did not detect that the issuer's accounting for warrants as equity was not in conformity with FASB ASC Topic 815 Derivatives and Hedging. (AS 2201.42 and .44)

During the audit the firm did not identify and appropriately address that the issuer's accounting for warrants as equity was not in conformity with FASB ASC Topic 815. (AS 2810.30) Unrelated to our review the issuer reevaluated its accounting for these warrants 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 and the firm revised and reissued its report on the financial statements. The issuer also reevaluated its controls over warrants and concluded that a material weakness existed that had not been previously identified. The issuer subsequently revised its report on ICFR to reflect this material weakness and the firm modified its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report.

The firm selected for testing a control that consisted of the issuer's review of the calculation of outstanding shares which was used to calculate earnings per share. The firm did not identify that this control was not designed to consider whether certain financial instruments should be included in these calculations in conformity with GAAP. (AS 2201.42)

The firm did not identify and appropriately address that the issuer's accounting for certain financial instruments was not in conformity with FASB ASC Topic 260 Earnings Per Share and FASB ASC Topic 815 Derivatives and Hedging. (AS 2810.30) Unrelated to our review the issuer reevaluated its accounting for these financial instruments 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 and the firm revised and reissued its report on the financial statements. The issuer also reevaluated its controls over these financial instruments and concluded that a material weakness existed that had not been previously identified. The issuer subsequently revised its report on ICFR to reflect this material weakness and the firm modified its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report.

The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to two types of revenue and the related accounts receivable deferred revenue related to one of these types of revenue and/or investment securities. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. With respect to change management: · For the other IT systems the firm selected for testing controls over change management but did not perform any substantive procedures to test or in the alternative test any controls over the completeness of the population of items from which it selected its samples for testing. (AS 1105.10)

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

The issuer used multiple IT systems to initiate process and/or record transactions related to certain revenue and/or deferred revenue. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. With respect to segregation of duties: · For two IT systems the firm selected for testing a control that consisted of the review of segregation of duties. The firm did not test the aspect of the control that addressed whether certain users with administrative access to the tool used to implement changes also had the ability to develop these changes. (AS 2201.42 and .44)

The issuer used multiple IT systems to initiate process and/or record transactions related to certain revenue and/or deferred revenue. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. With respect to segregation of duties: · For another IT system the firm selected for testing two controls that consisted of the review of segregation of duties. The firm did not test beyond inquiry the aspect of the controls that addressed whether certain users with access to the tools used to implement changes also had the ability to develop these changes. (AS 2201.42 and .44)

The issuer used multiple IT systems to initiate process and/or record transactions related to certain revenue and/or deferred revenue. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. With respect to segregation of duties: · For an additional IT system the firm selected for testing an automated control that was designed to address the risk of developers being able to implement changes. The firm's procedures were not sufficient because they 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)

The issuer used multiple IT systems to initiate process and/or record transactions related to certain revenue and/or deferred revenue. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. With respect to change management for one of these IT systems the firm did not identify and test any controls over changes to the underlying master data. (AS 2201.39)

As a result of the firm's ITGC testing deficiencies for certain revenue and deferred revenue the firm did not perform sufficient substantive procedures to test or sufficiently test controls over the accuracy and completeness of certain system-generated data or reports (1) the firm used to make its selections to test certain controls; (2) the firm used in its substantive testing including analytical procedures; or (3) the company's specialists used. (AS 1105.10 and .A8a; AS 2305.16)

The firm selected for testing a control over the issuer's review of contracts for appropriate revenue recognition. The firm did not evaluate the specific review procedures that the control owners performed to assess whether the allocation of revenue to separate performance obligations was based on standalone selling prices. (AS 2201.42 and .44)

The firm did not perform any substantive procedures to evaluate whether the issuer's allocation of revenue to separate performance obligations was based on standalone selling prices. (AS 2301.08)

For one type of revenue the firm selected for testing certain automated controls that the issuer used to process and record transactions related to this revenue. The firm did not sufficiently test the operating effectiveness of these controls because its procedures consisted of testing for each control a sample of one transaction in the issuer's IT testing environment without performing any procedures to determine whether the testing environment was the same as the production environment at the time of its testing. (AS 2201.44)

The firm's approach for substantively testing the above revenue and another type of revenue consisted primarily of performing a software-assisted analysis to test the relationships among revenue accounts receivable and cash receipts. The firm did not perform sufficient procedures to test this revenue as follows: · For the first type of revenue discussed above the reliability of the audit evidence obtained from this analysis was dependent upon the firm's testing of a control over the data underlying the analysis. The firm did not evaluate whether the control selected for testing addressed all the cash receipts used in this analysis. (AS 1105.10)

The issuer used multiple information-technology (IT) systems to initiate process and record transactions related to two types of revenue and the related accounts receivable deferred revenue related to one of these types of revenue and/or investment securities. In its testing of controls over these accounts the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by certain of these IT systems. With respect to change management: · The firm did not identify and test any controls designed to address the risk related to unauthorized users having administrative access to certain tools the issuer used to manage changes to the production environments. (AS 2201.39)

The firm's approach for substantively testing the above revenue and another type of revenue consisted primarily of performing a software-assisted analysis to test the relationships among revenue accounts receivable and cash receipts. The firm did not perform sufficient procedures to test this revenue as follows: · For the second type of revenue the reliability of the audit evidence obtained from this analysis was dependent upon the firm's testing of details of certain data underlying the analysis. The sample the firm tested for the fourth quarter was smaller than the one the firm determined necessary for these procedures. (AS 1105.10)

The firm selected for testing controls over the recording of inventory. The firm did not identify and test any controls over the accuracy and completeness of certain reports used in the operation of these controls. (AS 2201.39)