Explorer

The firm received a positive confirmation response from a financial institution indicating that one of the cash amounts confirmed was a term deposit with an original maturity greater than three months. The firm did not perform any procedures to evaluate whether the issuer properly presented this amount as cash and cash equivalents in conformity with GAAP. (AS 2301.08)

The firm did not perform any procedures to test certain revenue. (AS 2301.08 and .13)

To test accounts receivable and certain other revenue the firm sent positive confirmation requests to the issuer's customers. The firm did not perform procedures beyond inquiry to evaluate the nature of exceptions in one returned confirmation. (AS 2310.33)

The firm received positive confirmation responses from financial institutions indicating that certain of the cash amounts confirmed were term deposits with original maturities greater than three months. The firm did not perform any procedures to evaluate whether the issuer properly presented these amounts as cash and cash equivalents in conformity with GAAP. (AS 2301.08)

The issuer's ALL included a qualitative reserve based on various qualitative factors. The following deficiency was identified: · The firm selected for testing two review controls over the issuer's determination of the qualitative reserve. The firm did not evaluate the specific review procedures that the control owners performed to evaluate the reasonableness of the assumptions used to develop the qualitative factors used in determining the qualitative reserve. (AS 2201.42 and .44)

The issuer performed cycle counts of inventory at a location. The following deficiency was identified: · The firm did not identify and test any controls over the issuer's review of cycle count results including any related inventory adjustments. (AS 2201.39) Unrelated to our review the issuer reevaluated its controls over inventory and concluded that material weaknesses existed that had not been previously identified. The issuer subsequently reflected these material weaknesses 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 issuer performed cycle counts of inventory at a location. The following deficiency was identified: · Due to the deficiencies described the firm did not obtain sufficient appropriate audit evidence that the cycle-count procedures the issuer used for this inventory were sufficiently reliable to produce results substantially the same as those that would have been obtained by a count of all items each year. (AS 2510.11)

The issuer performed cycle counts of inventory at other locations. The firm identified deficiencies in the design and operating effectiveness of these controls at year end. The following deficiency was identified: · The firm identified and tested various review controls that it believed would mitigate the deficiencies. 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 2201.68) Unrelated to our review the issuer reevaluated its controls over inventory and concluded that material weaknesses existed that had not been previously identified. The issuer subsequently reflected these material weaknesses 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 issuer performed cycle counts of inventory at other locations. The firm identified deficiencies in the design and operating effectiveness of these controls at year end. The following deficiency was identified: · The firm identified and tested various review controls that it believed would mitigate the deficiencies. The firm did not identify and test any controls over the accuracy and completeness of the information used in these reviews. (AS 2201.68) Unrelated to our review the issuer reevaluated its controls over inventory and concluded that material weaknesses existed that had not been previously identified. The issuer subsequently reflected these material weaknesses 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 issuer performed cycle counts of inventory at other locations. The firm identified deficiencies in the design and operating effectiveness of these controls at year end. The following deficiency was identified: · For one of these locations the firm attended the cycle counts at year end and performed test count procedures. The sample size the firm used for its test count procedures was too small to provide sufficient appropriate audit evidence over the existence of inventory because the firm did not take into account the relevant factors in determining its sample size including tolerable misstatement for the population the allowable risk of incorrect acceptance and the characteristics of the population. (AS 2315.16 .19 .23 and .23A)

The issuer performed cycle counts of inventory at other locations. The firm identified deficiencies in the design and operating effectiveness of these controls at year end. The following deficiency was identified: · For two of these locations the firm did not perform any substantive procedures to test the existence of inventory at year end. (AS 2301.08 and .11)

The firm did not identify and test any controls for certain locations where the issuer performed full physical inventory observations. (AS 2201.39) Unrelated to our review the issuer reevaluated its controls over inventory and concluded that material weaknesses existed that had not been previously identified. The issuer subsequently reflected these material weaknesses 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.

For one of these locations the firm observed the physical inventory counts and selected a sample of inventory items for testing. The sample size the firm used was too small to provide sufficient appropriate audit evidence over the existence of inventory because the firm did not take into account the relevant factors in determining its sample size including tolerable misstatement for the population the allowable risk of incorrect acceptance and the characteristics of the population. (AS 2315.16 .19 .23 and .23A)

For one other location the firm did not perform any substantive procedures to test the existence of inventory at year end. (AS 2301.08 and .11)

The firm selected for testing a control over the review of inventory reserves. The firm did not evaluate the specific review procedures that the control owners performed to evaluate the reasonableness of the inventory reserve. (AS 2201.42 and .44) Unrelated to our review the issuer reevaluated its controls over inventory and concluded that material weaknesses existed that had not been previously identified. The issuer subsequently reflected these material weaknesses 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 issuer's ALL included a qualitative reserve based on various qualitative factors. The following deficiency was identified: · The firm did not perform procedures to evaluate whether the issuer had a reasonable basis for the significant assumptions used to determine the qualitative reserve beyond obtaining and reading an issuer-prepared narrative. (AS 2501.16)

The firm selected for testing a control over the review of inventory reserves. The firm did not identify and test any controls over the accuracy and completeness of information used in the operation of this control (AS 2201.39) Unrelated to our review the issuer reevaluated its controls over inventory and concluded that material weaknesses existed that had not been previously identified. The issuer subsequently reflected these material weaknesses 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's approach for substantively testing inventory reserves was to test the issuer's process used to develop the reserve. The firm did not perform procedures to test or identify and test any controls over the completeness of certain information it used to substantively test the inventory reserve. (AS 1105.10)

The firm's approach for substantively testing inventory reserves was to test the issuer's process used to develop the reserve. The firm did not perform procedures beyond inquiry to evaluate the reasonableness of significant assumptions used to determine the inventory reserve. (AS 2501.16)

The issuer used certain qualitative factors to determine the qualitative component of the ALL. The firm's approach for substantively testing the qualitative component of the ALL was to test the issuer's process and develop an independent expectation. The following deficiency was identified: · The firm did not evaluate whether the issuer had a reasonable basis for certain significant assumptions related to basis points assigned to qualitative factors used to determine the qualitative component of the ALL. (AS 2501.16)

The issuer used certain qualitative factors to determine the qualitative component of the ALL. The firm's approach for substantively testing the qualitative component of the ALL was to test the issuer's process and develop an independent expectation. The following deficiency was identified: · The firm did not perform any procedures to demonstrate it had a reasonable basis for the assumptions it used in determining its independent expectation. (AS 2501.22)

The issuer used loan risk ratings to estimate its ACL. The firm did not identify and test any controls that addressed the reasonableness of loan risk ratings. (AS 2201.39)

The firm identified control deficiencies related to significant accounts and in areas of significant risk. The firm did not sufficiently evaluate the severity of these control deficiencies because it did not evaluate the magnitude of the potential misstatements resulting from the deficiencies. (AS 2201.62)

The firm engaged a specialist to evaluate the fair value hierarchy classifications for the issuer's investment securities. The firm did not perform procedures beyond quantifying the differences in fair value or request that the auditor-engaged specialist perform additional procedures to address the specialist's findings that appeared to contradict the issuer's presentation of these investment securities within the fair value hierarchy. (AS 1210.12; AS 2301.08)

The firm identified fraud criteria for journal entries and obtained a listing of all journal entries that met the criteria. The firm did not perform sufficient substantive procedures to test those journal entries because it limited its procedures to evaluating the journal entry descriptions. (AS 2401.61)

The issuer engaged an external specialist to develop estimates related to certain long-lived assets. The firm's approach for substantively testing this estimate was to test the issuer's process. The following deficiency was identified: · The firm did not perform any procedures to test the accuracy and completeness of certain issuer-produced data and evaluate the relevance and reliability of certain data from external sources that the company's specialist used. (AS 1105.A8a)

The issuer monitored loan delinquency and used that information to identify potential problem loans for impairment evaluation. The firm did not identify and test any controls over the identification and classification of past due loans within the issuer's loan system. (AS 2201.39)

The issuer engaged an external specialist to develop estimates related to certain long-lived assets. The firm's approach for substantively testing this estimate was to test the issuer's process. The following deficiency was identified: · The firm did not perform any procedures to evaluate the reasonableness of certain significant assumptions developed by the issuer and the company's specialist. (AS 1105.A8b; AS 2501.16)

The issuer engaged an external specialist to develop estimates related to certain long-lived assets. The firm's approach for substantively testing this estimate was to test the issuer's process. The following deficiency was identified: · The firm did not perform procedures to evaluate the reasonableness of certain components of other significant assumptions developed by the issuer and used by the company's specialist. (AS 2501.16)

The issuer engaged an external specialist to develop estimates related to certain long-lived assets. The firm's approach for substantively testing this estimate was to test the issuer's process. The following deficiency was identified: · The firm did not perform any procedures beyond inquiry to evaluate whether the methods used by the company's specialist were appropriate under the circumstances. (AS 1105.A8c)

The issuer reported an ACL that included both a quantitative and qualitative component. The issuer used certain qualitative factors including assigned loan risk grades to determine the qualitative component of the ACL. The following deficiency was identified: · The firm selected for testing a review control over the qualitative reserve. The firm did not evaluate the specific review procedures the control owners performed to evaluate the reasonableness of the basis points applied to the qualitative factors. (AS 2201.42 and .44)

The issuer reported an ACL that included both a quantitative and qualitative component. The issuer used certain qualitative factors including assigned loan risk grades to determine the qualitative component of the ACL. The following deficiency was identified: · The firm selected for testing a control that consisted of the issuer's review of loans including a review of the reasonableness of assigned loan risk grades. This control included a determination of which loans would be subject to a review of the assigned loan risk grades. The firm did not assess the effect of the issuer excluding certain loans from review of the assigned loan risk grades on the control's ability to effectively prevent or detect a material misstatement. (AS 2201.42)

The issuer reported an ACL that included both a quantitative and qualitative component. The issuer used certain qualitative factors including assigned loan risk grades to determine the qualitative component of the ACL. The following deficiency was identified: · The firm did not perform procedures to evaluate whether the issuer had a reasonable basis for the significant assumptions related to basis points applied to the qualitative factors beyond obtaining and reading an issuer-prepared narrative. (AS 2501.16)

The issuer reported an ACL that included both a quantitative and qualitative component. The issuer used certain qualitative factors including assigned loan risk grades to determine the qualitative component of the ACL. The following deficiency was identified: · The firm did not perform any procedures to evaluate the reasonableness of a significant assumption used to develop the quantitative component. (AS 2501.16)

The issuer used loan risk ratings to estimate its ACL. The firm did not identify and test any controls over the reasonableness of loan risk ratings. (AS 2201.39)

The firm did not perform procedures to test the accuracy and completeness of certain issuer-produced reports beyond testing their mathematical accuracy that the issuer used to identify performance obligations and allocate transaction prices to those obligations and the firm used in its substantive procedures. (AS 1105.10)

The firm selected for testing a control over the review of potential other-than-temporary-impairment on available-for-sale investment securities. 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 did not sufficiently evaluate a departure from GAAP related to the issuer's recording of certain available-for-sale investment securities at par value rather than fair value in accordance with FASB ASC Topic 320 Investments — Debt Securities because it did not evaluate whether the uncorrected misstatement was material taking into account relevant quantitative and qualitative considerations in materiality judgments. (AS 2810.17 .30 and .31)

The firm engaged a specialist to evaluate the fair value hierarchy classifications for the issuer's available-for-sale investment securities. The firm did not perform additional procedures beyond consideration of directional risk or request that the auditor-engaged specialist perform additional procedures to address the specialist's findings that appeared to contradict the issuer's presentation of these investment securities within the fair value hierarchy. (AS 1210.12; AS 2301.08)

The firm identified a deficiency related to the ability of individuals to post journal entries without review or approval. The firm tested two controls that it believed would compensate for this deficiency but did not identify that these controls did not address the risk of material misstatement related to unapproved journal entries. (AS 2201.68)

The firm identified fraud criteria for journal entries and obtained a listing of all journal entries that met the criteria. The firm selected for testing certain journal entries that met the criteria. The firm did not perform sufficient substantive procedures to test journal entries because it did not have an appropriate rationale for limiting its procedures to certain journal entries that met the fraud criteria. (AS 2401.61)

The issuer performed cycle counts of inventory at a location. The following deficiency was identified: · The firm did not identify and test any controls that addressed whether all of the inventory items were assigned a frequency to be counted and the appropriateness of the assignment. (AS 2201.39) Unrelated to our review the issuer reevaluated its controls over inventory and concluded that material weaknesses existed that had not been previously identified. The issuer subsequently reflected these material weaknesses 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 selected for testing two controls over the issuer's determination of the ACL. The issuer used certain system-generated reports that it obtained from an application that was hosted by a service organization in the performance of these controls. The firm obtained the service auditor's report for this service organization and identified certain complementary user controls related to user access that the service auditor's report described as necessary. The firm identified control deficiencies in its testing of these complementary user controls and selected for testing a compensating control that consisted of the issuer's review of user access. The firm did not identify and test any controls over the accuracy and completeness of the user population used in the operation of this compensating control. (AS 2201.68)

The firm selected for testing a control that included the issuer's reviews of certain assumptions used to estimate the quantitative component of the ACL. In evaluating the design of this control the firm did not evaluate whether a threshold that the control owner used to identify items for investigation was sufficiently precise to detect material misstatements. (AS 2201.42)

The firm selected for testing a control that included the issuer's reviews of certain assumptions used to estimate the quantitative component of the ACL. In evaluating the design of this control the firm did not evaluate the specific review procedures that the control owner performed to evaluate the relevance of external information used in the operation of this control. (AS 2201.42 and .44)

The firm did not perform sufficient substantive procedures to evaluate the reasonableness of certain significant assumptions the issuer used to estimate the ACL because the firm did not evaluate (1) whether the assumptions were consistent with other external factors including economic conditions and (2) the relevance of certain market information the issuer used. (AS 1105.04 and .06; AS 2501.16)

During the year the issuer acquired a business. The following deficiencies were identified: · The firm did not identify and test any controls over certain assets acquired and liabilities assumed as of the acquisition date. (AS 2201.39)

During the year the issuer acquired a business. The following deficiencies were identified: · The issuer engaged a specialist to determine the fair values of certain acquired assets as of the acquisition date. The firm did not perform procedures to test or test controls over the accuracy of certain issuer-produced data used by the company's specialist to determine the fair values of these assets. (AS 1105.A8a)

The issuer assigned each loan a loan risk rating which was an important input in estimating the quantitative component of the ACL. The firm selected for testing a control that included the issuer's reviews of loan risk ratings and tested the control at an interim date. The firm did not perform procedures to update the results of its testing from the interim date to year end. (AS 2201.55)

During the year the issuer acquired a business. The firm selected for testing a control that included the issuer's review of the fair values of acquired assets and the related significant assumptions. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of certain of these significant assumptions. (AS 2201.42 and .44)