Explorer

The firm did not identify and test any controls over the valuation of accounts receivable. (AS 2201.39)

The firm did not perform sufficient procedures to test the valuation of accounts receivable because it used certain information obtained from external sources in its substantive testing of receivables and did not perform any procedures to evaluate the relevance and reliability of this information. (AS 1105.04 and .06)

The firm's approach for substantively testing certain revenue consisted primarily of performing a software-assisted analysis which included performing procedures to test the accuracy of information used in this analysis. The software-assisted analysis was designed to test the relationships among revenue accounts receivable and cash that the issuer recorded through journal entries. The firm however did not perform procedures to test the appropriateness of the cash data used in this analysis. (AS 1105.10)

The firm was instructed by the principal auditor to select for testing journal entries that met certain specified criteria. The following deficiency was identified: · The firm did not perform procedures to identify journal entries that met one of the criteria. (AS 2401.61)

The firm was instructed by the principal auditor to select for testing journal entries that met certain specified criteria. The following deficiency was identified: · The firm did not perform sufficient procedures to identify journal entries that met the remaining criteria because it limited its selection to certain journal entries without having an appropriate rationale. (AS 2401.61)

The firm was instructed by the principal auditor to select for testing journal entries that met certain specified criteria. The following deficiency was identified: · The firm did not perform procedures to test the journal entries identified and selected for testing. (AS 2401.61)

The firm identified a deficiency in the design and operating effectiveness of a control over deposits that consisted of the reconciliation of in-process suspense and non-post deposit account balances from the deposit subsidiary ledger to the general ledger. The firm identified and tested controls that it believed would mitigate the deficiency. The firm did not identify that (1) the compensating controls tested did not address the in-process suspense and non-post reconciling items subject to the control and (2) one of the compensating controls was dependent on the effectiveness of the deficient control. (AS 2201.68)

The issuer's ALL included a general reserve which consisted of quantitative and qualitative components. The firm selected for testing a control that consisted of the issuer's review of the underlying data and primary calculations supporting an ALL analysis designed to assess the appropriateness of the quantitative and qualitative adjustments. The firm did not evaluate the specific review procedures that the control owner performed to (1) assess the appropriateness of the adjustments and (2) verify the accuracy and completeness of the data used in determining certain of the adjustments. (AS 2201.42 and .44)

The issuer used a service organization to process and record participant distributions. The firm's approach to substantively test participant distributions included reliance on controls including controls over the accuracy and completeness of certain information obtained from the service organization related to participant distributions. The firm did not perform any procedures to identify and test the operating effectiveness of complimentary user controls in place at the issuer related to participant distributions. (AS 2601.14)

The firm used negative confirmations to substantively test the existence of deposits. This procedure did not provide sufficient appropriate audit evidence because it was based on a combined assessed level of inherent and control risk of low that was not supported due to the deficiency in the firm's control testing discussed above. (AS 2310.20)

The firm identified a fraud risk related to the potential for management override of controls and determined that certain individuals could both initiate and record journal entries without any secondary review or approval. To address this fraud risk the firm identified journal entries that met certain criteria and haphazardly selected certain of those journal entries for testing without having a basis for its selection. For certain other journal entries that met these criteria the firm did not examine the underlying support for these entries and instead limited its procedures to inquiring of management and/or evaluating the journal entry descriptions. (AS 2401.61)

The firm identified a fraud risk related to the potential for management override of controls and determined that certain individuals could both initiate and record journal entries without any secondary review or approval. To address this fraud risk the firm identified journal entries that met certain criteria and haphazardly selected certain of those journal entries for testing without having a basis for its selection. The firm did not identify or test any controls over the recording of journal entries that would address the fraud risk identified. (AS 2201.39)

The issuer's internal audit group identified certain deficiencies in the issuer's controls related to mortgage loans that it had selected for testing. The firm did not evaluate the severity of each control deficiency identified by internal audit to determine whether the deficiency individually or in combination with other deficiencies constituted a material weakness. (AS 2201.62)

The firm's approach for substantively testing revenue and related accounts was to review and test management's process. The following deficiencies were identified: - The firm did not perform sufficient procedures to evaluate the reasonableness of the assumptions used by the issuer to estimate revenue and related accounts because its procedures were limited to reading the memorandum prepared by the issuer and comparing certain assumptions to those used by the issuer in the previous year. (AS 2501.16)

The firm's approach for substantively testing revenue and related accounts was to review and test management's process. The following deficiencies were identified: - The firm did not perform any procedures to test or in the alternative test any controls over the accuracy and completeness of certain disaggregated information generated from the issuer's system and used to estimate revenue and related accounts. (AS 1105.10)

The issuer's ALL included a general reserve which consisted primarily of a qualitative component. The firm's approach for substantively testing the ALL was to review and test management's process. The following deficiencies were identified: - The firm did not perform sufficient procedures to evaluate the reasonableness of certain assumptions used by the issuer to develop the qualitative component of the general reserve ('qualitative reserve') because the firm did not evaluate whether the issuer had a reasonable basis for the assumptions. (AS 2501.16)

The issuer's ALL included a general reserve which consisted primarily of a qualitative component. The firm's approach for substantively testing the ALL was to review and test management's process. The following deficiencies were identified: - The firm did not perform any procedures to test or in the alternative test any controls over the accuracy and completeness of certain historical loss information generated from the issuer's system and used to develop a portion of the qualitative reserve. (AS 1105.10)

During the year the issuer completed a business combination and determined the fair value of the acquired intangible assets using several assumptions. The firm selected for testing a control that included management's review of the fair value of the acquired intangible assets. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of the assumptions. (AS 2201.42 and .44)

In addition as a result of the firm's testing performed in the audit of the issuer's financial statements the firm identified modifications to certain assumptions used by the issuer to determine the fair value of the acquired intangible assets. The firm did not evaluate the effect of these modifications identified in its substantive audit procedures on its conclusions regarding the design and operating effectiveness of this control. (AS 2201.B8)

The firm did not identify and test any controls over the determination and valuation of certain deferred tax assets. (AS 2201.39) Unrelated to our review the issuer reevaluated its accounting for income taxes 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 income taxes and concluded that a material weakness existed that had not been previously identified. The issuer subsequently reflected this material weakness in a revision to its report on ICFR and the firm revised its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report.

The firm did not identify and evaluate a departure from GAAP related to the issuer's reporting of certain deferred tax assets that should have been written off and recognized as income tax expense in accordance with FASB ASC Topic 740 Income Taxes. (AS 2810.30 and .31)

The issuer presented as a component of revenue in its statement of operations a material transaction that was of an unusual nature and infrequent occurrence. FASB ASC Topic 220 Income Statement requires such events or transactions to be reported as a separate component of income from continuing operations. The firm did not perform any procedures to evaluate the appropriateness of the issuer's presentation of such transactions as a component of revenue. (AS 2301.08 and .13)

The firm did not perform sufficient procedures to test certain accounts receivable outstanding longer than a year as it limited its procedures to tracing the balances to its prior year audit work papers. (AS 2301.08)

The firm did not perform sufficient procedures to test certain accounts receivable outstanding less than one year as it limited its procedures to tracing transactions to statements produced by the party owing the funds which were provided by the issuer. (AS 2301.08)

The firm did not perform any procedures to test the valuation of certain share-based payment transactions. (AS 2501.07)

Deficiency evaluating the reasonableness of assumptions in the issuer's discounted cash flow impairment analysis.

Deficiency evaluating the discount rate used in the issuer's fair value estimate for a significant account.

The firm did not test or in the alternative test any controls over the accuracy and completeness of the system-generated report that the issuer used to classify non-current inventory which was separately presented in the financial statements. (AS 1105.10)

The firm selected for testing a control that consisted of the review of a memorandum documenting the issuer's revenue recognition methodology. The issuer prepared this memorandum using questionnaire responses received from issuer personnel regarding key terms of contracts and purchase orders that could affect revenue recognition. The firm did not identify and test any controls to address the accuracy of the information contained in the questionnaires used in the operation of this control. (AS 2201.39)

The firm selected for testing a control that included the review of the issuer's annual goodwill impairment analysis. The firm did not evaluate the review procedures that the control owners performed including the procedures to identify items for follow up and the procedures to determine whether those items were appropriately resolved. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the review of the qualitative or quantitative analysis based on the reporting unit used in the issuer's annual goodwill impairment assessment. 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)

For certain locations the firm selected for testing a control that consisted of the review of journal entries. The firm did not evaluate the specific review procedures that the control owners performed to assess the appropriateness of the journal entries. (AS 2201.42 and .44)

For certain other locations the firm did not identify and test any controls over the review of journal entries. (AS 2201.39)

For certain locations the firm identified characteristics of potentially fraudulent entries or adjustments for testing but did not determine whether any journal entries met those characteristics and instead limited its testing to haphazardly selected journal entries. (AS 2401.61)

The firm selected for testing certain automated application controls related to revenue. The firm's testing of these controls was not sufficient because the procedures performed were substantive in nature and did not directly test the controls. (AS 2201.42 .44 and .B9)

The firm selected for testing a control over the valuation of goodwill. The firm did not identify and test controls over the accuracy of data used in the operation of this control. (AS 2201.39)

The firm did not perform any procedures to identify and select journal entries and other adjustments for testing. (AS 2401.58)

The firm did not perform any substantive procedures to test whether inventory was recorded at the lower of cost or net realizable value. (AS 2301.08 and .11)

The firm's approach for substantively testing the excess or obsolete inventory reserve was to develop an independent expectation. The following deficiencies were identified: · The firm used certain data in its substantive procedures to test this reserve but did not perform any procedures to test or test any controls over the accuracy of this data. (AS 1105.10)

The firm's approach for substantively testing the excess or obsolete inventory reserve was to develop an independent expectation. The following deficiencies were identified: · The firm did not perform procedures to demonstrate it had a reasonable basis for certain assumptions it independently derived. (AS 2501.22)

The firm's approach for substantively testing the excess or obsolete inventory reserve was to develop an independent expectation. The following deficiencies were identified: · The firm did not perform sufficient procedures to demonstrate it had a reasonable basis for the method used to develop its independent expectation because it did not demonstrate how its method took into account its understanding of the issuer's process including the significant assumptions used by the issuer so that its expectation considered the factors relevant to the estimate. (AS 2501.21 and .22)

The issuer assigned a risk rating to each loan. The loan risk ratings were an important input in estimating the ALL. The firm's approach for substantively testing the ALL was to review and test management's process. The firm did not sufficiently evaluate the appropriateness of the loan risk ratings because its procedures were limited to testing the risk ratings for a selection of loans originated in the current year and comparing loan risk ratings used in the ALL calculation for certain loans to issuer-prepared reports. (AS 2501.09 .10 and .11)

The issuer determined the qualitative component of the ALL by applying basis points for qualitative factors to each loan type. The firm's approach for substantively testing the qualitative component was to test the issuer's process. The following deficiency was identified: · The firm did not evaluate the reasonableness of the significant assumptions the issuer used to develop this component. (AS 2501.16)

The issuer determined the qualitative component of the ALL by applying basis points for qualitative factors to each loan type. The firm's approach for substantively testing the qualitative component was to test the issuer's process. The following deficiency was identified: · The firm did not perform any procedures to test the accuracy and/or completeness of reports from the issuer's systems that the firm used in its substantive procedures. (AS 1105.10)

The firm did not perform any procedures to evaluate the relevance and reliability of data from an external source that it used in its substantive procedures to test loans. (AS 1105.04 and .06)

The principal auditor instructed the firm to use and evaluate the quality and effectiveness of the work performed by a third party working under the direction of management as evidence regarding the operating effectiveness of a control related to the review of inventory costing for one of the issuer's components. The firm did not identify that the third party did not evaluate and the firm did not perform procedures to 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 2201.44; AS 2605.24 and .26)

The principal auditor instructed the firm to test the operating effectiveness of a control related to the review of the reserves for slow-moving and obsolete inventories for three of the issuer's components. 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 2201.44)

The principal auditor instructed the firm to test the costing of inventory at one of the issuer's components by comparing inventory costs to vendor invoices payroll records labor hours and machine hours. The firm did not perform these substantive procedures. (AS 2301.08)

The principal auditor instructed the firm to use and evaluate the quality and effectiveness of the work performed by a third party working under the direction of management as evidence regarding the operating effectiveness of a control related to the review of the allowance for doubtful accounts for one of the issuer's components. The firm did not identify that the third party did not test and the firm did not perform procedures to test the aspect of the control that addressed the reasonableness of the allowance for doubtful accounts. (AS 2201.44; AS 2605.24 and .26)

The firm was instructed by the principal auditor to evaluate the reliability of certain external information used by the issuer in its qualitative assessment of impairment of a certain long-lived asset. The firm was unable to evaluate the reliability of this information. Instead the firm compared the information used by the issuer to other information independently obtained by the firm that it believed was comparable to information used by the issuer. The firm however did not perform any procedures to evaluate the reliability of the information it independently obtained. Further the firm did not perform procedures to evaluate the relevance of this information beyond one consideration. (AS 1105.04 and .06)