Explorer

The firm did not perform any substantive procedures to test or in the alternative test any controls over the accuracy and completeness of information used in the firm's testing of certain controls. (AS 1105.10)

The firm's approach for substantively testing the issuer's reserve for certain inventory was to develop an independent expectation based on an inventory aging. The firm did not perform any substantive procedures to test or in the alternative test any controls over the accuracy and completeness of the inventory aging. (AS 1105.10; AS 2501.09 .10 and .12)

The firm's approach for substantively testing the issuer's reserve for certain inventory was to develop an independent expectation based on an inventory aging. The firm did not perform any substantive procedures to test the reasonableness of the reserve for certain other inventory. (AS 2501.07)

The firm selected for testing controls over existence and valuation of inventory that consisted of the issuer's reviews of inventory records average cost and amortization. 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 used two information technology (IT) systems to support the inventory process. Both IT systems were configured based on user roles and profiles which determined user access levels. The firm selected for testing access controls over the IT systems that consisted of the issuer's reviews of user access lists with roles and profiles. The firm did not evaluate the specific review procedures that the control owners performed to determine whether to grant access to users or whether the granted access continued to be appropriate. (AS 2201.42 and .44)

The issuer used two information technology (IT) systems to support the inventory process. Both IT systems were configured based on user roles and profiles which determined user access levels. The firm selected for testing controls over the program changes for these IT systems. The firm did not test or test any controls over the accuracy and completeness of the population of IT systems program changes from which it made its selections for testing. (AS 1105.10)

The firm selected for testing various IT-dependent manual controls that used data and reports generated by these IT systems. As a result of the deficiencies in the firm's testing of information technology general controls discussed above the firm's testing of these IT-dependent manual controls was not sufficient. (AS 2201.46)

The firm's internal inspection program had inspected this audit and reviewed this area but did not identify the deficiency below. The issuer reported different types of inventory. The following deficiency was identified: • The firm selected for testing a control over the review of certain inventory but did not perform procedures to test the design and operating effectiveness of this control. (AS 2201.42 and .44)

The firm's internal inspection program had inspected this audit and reviewed this area but did not identify the deficiency below. The issuer reported different types of inventory. The following deficiency was identified: • The firm selected for testing controls over the review of certain other inventory and metrics of all inventory. The firm did not evaluate the review procedures that the control owners performed including 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's internal inspection program had inspected this audit and reviewed this area but did not identify the deficiency below. The issuer reported different types of inventory. The following deficiency was identified: • The firm did not identify and test any controls over the completeness and accuracy of reports that were used in the operation of certain of the controls it selected for testing over inventory. (AS 2201.39)

The firm's internal inspection program had inspected this audit and reviewed this area but did not identify the deficiency below. The firm did not perform any procedures to test certain components of the issuer's calculation of the cost of certain inventory. (AS 2301.08)

The issuer acquired a business during the year. The firm did not perform procedures beyond inquiry of management to evaluate whether the issuer identified and properly recorded all assets acquired including patent applications trade names trademarks and service marks held by the acquired entity as identifiable intangible assets in accordance with FASB ASC Topic 805 Business Combinations. (AS 2301.08)

The issuer issued stock purchase warrants with a strike price denominated in its functional currency at the time of issuance. The issuer determined that the warrants met the scope exception of FASB ASC Topic 815 Derivatives and Hedging and recorded the fair value of the warrants as additional paid-in capital. The issuer subsequently changed its functional currency which resulted in the warrants no longer meeting the scope exception. The issuer however did not revise its accounting for the warrants. The firm did not identify and appropriately address this GAAP departure. (AS 2810.30 and .31) Unrelated to our review the issuer reevaluated its accounting for 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.

The firm performed inventory observations at two business units subsequent to year end and performed roll-back procedures for the period from the date of the inventory observations to year end. For one of the business units the firm did not perform procedures beyond reviewing a schedule of inventory movement to test transactions between the date of the inventory observation to year end. (AS 2510.12)

The firm performed inventory observations at two business units subsequent to year end and performed roll-back procedures for the period from the date of the inventory observations to year end. For one of the business units the firm did not perform sufficient procedures to test the completeness of inventory at either business unit such as comparing quantities observed to the physical inventory summary. (AS 2301.08)

The firm's approach for substantively testing the allowance for doubtful accounts was to review and test management's process. The firm did not sufficiently evaluate the reasonableness of the allowance because it limited its procedures to (1) inquiry of management (2) reviewing the issuer's accounts receivable aging report and (3) comparing the allowance balance to the issuer's general ledger. (AS 2501.09 .10 and .11)

The firm did not perform a substantive test of details over revenue. (AS 2301.08 and .13)

The firm's substantive analytical procedures over revenue were insufficient because: · The firm did not determine whether the expectations it used in these analytical procedures were based on predictable relationships (AS 2305.13 and .14)

The firm's substantive analytical procedures over revenue were insufficient because: · The firm used certain system-generated sales data in its substantive analytical procedures but did not perform any procedures to test or test any controls over the accuracy and completeness of the data. (AS 2305.16)

For a certain loan payable the firm did not perform sufficient procedures to test the existence valuation rights and obligations classification and related disclosures as the firm's procedures were limited to (1) preparing a roll forward noting no change in the balance (2) agreeing the loan balance at the beginning of the year to prior year financial statements audited by the predecessor auditor and (3) agreeing the ending balance to the trial balance. (AS 2301.08)

The firm did not perform procedures to evaluate the relevance and reliability of certain external data the issuer used to record revenue and that the firm used in its testing of revenue. (AS 1105.04 and .06)

The firm did not perform sufficient procedures to test the existence of certain inventory located at external warehouses. Although the firm sent confirmations to the outside custodians no responses were received. The firm's alternative procedures were not sufficient because the firm limited its procedures to agreeing the total quantity of the inventory located at the warehouses to reports provided by the owner of the warehouses to the issuer. (AS 2510.14)

The firm selected a sample of transactions to test revenue and performed cut-off testing. The following deficiency was identified: • The firm determined that the issuer was unable to support whether or not it had satisfied its performance obligations for several revenue transactions selected for testing. As a result the firm identified adjusting entries that the issuer recorded. The firm did not perform procedures to obtain further audit evidence to address whether the adjusting journal entries were appropriate or if the firm was unable to obtain sufficient appropriate audit evidence to have a reasonable basis to conclude about whether the financial statements as a whole were free of material misstatement the firm should have expressed a qualified opinion or a disclaimer of opinion. (AS 2810.35) In connection with our review the issuer reevaluated its accounting for certain revenue and related accounts 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 held equity-method investments with various investees. For one equity-method investment the following deficiency was identified: • The firm did not perform procedures beyond inquiry to evaluate whether the issuer evaluated whether there were any factors or indicators that there was an other than temporary decrease in the value of this investment in accordance with FASB ASC Topic 323 Investments – Equity Method and Joint Ventures including consideration of certain factors of which the firm was aware that indicated that there was a loss in the value of the investment that was other than a temporary decline. (AS 2301.08 and .11; AS 2810.03)

The issuer held equity-method investments with various investees. For one equity-method investment the following deficiency was identified: • The firm did not perform procedures beyond inquiry to evaluate whether the issuer recognized its share of the earnings or losses of the investee. (AS 2301.08 and .11)

The issuer held equity-method investments with various investees. For one equity-method investment the following deficiency was identified: • The firm did not sufficiently evaluate the issuer's conclusion not to consolidate this investee because it did not evaluate whether the issuer had a controlling financial interest in the investee. (AS 2301.08 and .11)

For another equity-method investment the firm did not perform procedures beyond inquiry to test the valuation of this investment at year end and the related impairment losses. Further the firm did not perform procedures to test whether impairment losses were recorded in the appropriate period even though it was aware of certain contrary evidence. (AS 2301.08; AS 2810.03)

The issuer reported goodwill related to certain reporting units. The firm did not perform any procedures to evaluate whether the issuer identified its reporting units in conformity with FASB ASC Topic 350 Intangibles – Goodwill and Other. (AS 2301.08 and .13)

For one reporting unit the issuer engaged an external specialist to perform a quantitative assessment to evaluate goodwill for impairment. The firm's approach for substantively testing the quantitative assessment was to test the issuer's process and develop an independent expectation. The following deficiency was identified: • The firm did not perform procedures to evaluate the reasonableness of certain significant assumptions used by the company's specialist in the quantitative assessment and/or used by the firm in developing its independent expectation. (AS 1105.A8b; AS 2501.16)

For one reporting unit the issuer engaged an external specialist to perform a quantitative assessment to evaluate goodwill for impairment. The firm's approach for substantively testing the quantitative assessment was to test the issuer's process and develop an independent expectation. The following deficiency was identified: • The firm did not perform procedures to demonstrate it had a reasonable basis for certain assumptions it independently derived and used in its independent expectation. (AS 2501.22)

For another reporting unit the issuer performed a qualitative assessment to evaluate goodwill for impairment and determined that it was not more likely than not that the carrying value of the reporting unit was more than its fair value. The firm's approach for substantively testing whether this goodwill was impaired was to develop an independent expectation of the fair value of the reporting unit. The firm did not perform procedures to demonstrate it had a reasonable basis for certain assumptions it independently derived and used in developing its independent expectation. (AS 2501.22)

The firm did not perform procedures to evaluate the issuer's qualitative assessments to evaluate whether certain of its investments were impaired. (AS 2301.08 and .11)

The issuer performed a quantitative assessment using a discounted cash flow analysis to assess goodwill for impairment. The firm did not perform procedures to test the issuer's quantitative assessment beyond comparing the analysis with prior year analyses testing the mathematical accuracy of the analysis and researching general industry economic conditions. (AS 2501.07)

The firm selected a sample of transactions to test revenue and performed cut-off testing. The following deficiency was identified: • The firm did not perform sufficient procedures to evaluate whether two additional journal entries that it identified to reverse revenue which the issuer recorded were appropriate because it did not evaluate the appropriateness of the offsets to the reversed revenue. (AS 2301.08 and .13) In connection with our review the issuer reevaluated its accounting for certain revenue and related accounts 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 firm did not perform sufficient procedures to evaluate whether the issuer recognized certain revenue in accordance with FASB ASC Topic 606 Revenue from Contracts with Customers because it did not evaluate the issuer's conclusions about collectability and satisfaction of performance obligations beyond obtaining confirmations from certain customers. (AS 2301.08 and .13)

The firm did not perform procedures to test the issuer's conclusion that an allowance for doubtful accounts was not necessary beyond testing the issuer's accounts receivable aging report for clerical accuracy and completeness and testing certain subsequent cash receipts. (AS 2501.07)

The issuer performed a quantitative assessment to determine whether its intangible assets were impaired. The firm's approach for substantively testing this assessment was to develop an independent expectation of the fair value of the intangible assets. The following deficiencies were identified: • The firm did not perform procedures to demonstrate that in developing its independent expectation it took into account certain requirements of the applicable financial framework so that its independent expectation considered the factors relevant to the estimate. (AS 2501.21)

The issuer performed a quantitative assessment to determine whether its intangible assets were impaired. The firm's approach for substantively testing this assessment was to develop an independent expectation of the fair value of the intangible assets. The following deficiencies were identified: • The firm did not perform procedures to demonstrate it had a reasonable basis for certain assumptions it independently derived beyond performing a sensitivity analysis for one of those assumptions. (AS 2501.22)

The issuer performed a quantitative assessment to determine whether its intangible assets were impaired. The firm's approach for substantively testing this assessment was to develop an independent expectation of the fair value of the intangible assets. The following deficiencies were identified: • The firm did not perform sufficient procedures to demonstrate that it had a reasonable basis including taking into account its understanding of the issuer's process for another assumption it derived because it did not demonstrate how its assumption took into account certain factors relevant to the estimate. (AS 2501.21 and .22)

The issuer performed a quantitative assessment to determine whether its intangible assets were impaired. The firm's approach for substantively testing this assessment was to develop an independent expectation of the fair value of the intangible assets. The following deficiencies were identified: • The firm did not perform procedures to evaluate the relevance and reliability of information it obtained from an external source and used to develop one of its assumptions. (AS 1105.04 and .06)

The firm did not plan and perform an audit that provided a reasonable basis for its audit opinion on the issuer's financial statements because its procedures were limited to establishing a materiality level for the financial statements certain planning procedures and obtaining certain issuer-prepared documents. (AS 1101.03; AS 1105.04; AS 2101.08 and .10; AS 2105.03; AS 2110.04; AS 2301.08; AS 2401.57; AS 2410.03; AS 2415.03; AS 2805.05; AS 2810.30 and .31

To test certain costs related to inventory the firm performed a substantive analytical procedure and developed a percentage as its expectation. The firm compared its expectation to the actual percentage and applied the percentage difference to the wrong amount. As a result the firm did not identify and evaluate a significant difference between its expectation and the actual amount. (AS 2305.21)

The issuer used various models and assumptions to estimate the useful life of certain long-lived assets which was then used (1) in the determination of periodic depreciation and amortization of those assets and (2) to accrue a related liability. The costs related to the accrued liability were capitalized as part of the carrying value of the related long-lived assets and depreciated over their estimated useful life. The following deficiencies were identified: · The firm did not identify and assess the risks of material misstatement related to the valuation of these long-lived assets and related accrued liability. (AS 2110.59)

The issuer used various models and assumptions to estimate the useful life of certain long-lived assets which was then used (1) in the determination of periodic depreciation and amortization of those assets and (2) to accrue a related liability. The costs related to the accrued liability were capitalized as part of the carrying value of the related long-lived assets and depreciated over their estimated useful life. The following deficiencies were identified: · Because of the deficiency in the firm's risk assessment procedures as discussed above the firm did not identify and test any controls over the valuation of these long-lived assets and related accrued liability (AS 2201.39).

The issuer used various models and assumptions to estimate the useful life of certain long-lived assets which was then used (1) in the determination of periodic depreciation and amortization of those assets and (2) to accrue a related liability. The costs related to the accrued liability were capitalized as part of the carrying value of the related long-lived assets and depreciated over their estimated useful life. The following deficiencies were identified: · In addition the firm did not perform procedures to test the reasonableness of an assumption used to estimate the value of the long-lived assets and related accrued liability and certain related disclosures in the issuer's financial statements. (AS 2301.08)

The subsidiary capitalized certain costs in the production of inventory. The firm selected for testing a control that consisted of management's review of a monthly cost analysis which compared actual to budgeted costs. The firm did not identify and test any controls over the accuracy and completeness of the monthly budgeted costs report used in the operation of this control. (AS 2201.39)

The issuer recognized revenue in accordance with the terms and conditions of contractual arrangements with customers which were entered into the billing systems and used to create sales invoices and record revenue. The firm did not identify and test any controls to ensure that customers were invoiced and the related revenue was recognized in accordance with the contractual terms and conditions. Further the firm did not identify and test any controls over the initial entry of pricing data into the issuer's billing systems. (AS 2201.39)

The firm selected for testing a control that consisted of the issuer's review of month-to-month revenue variances. 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 identify and test any controls over the identification of impairment indicators with respect to property plant and equipment ('PP&E'). Further the firm did not identify and test any controls over the determination of depreciation expense related to certain PP&E. (AS 2201.39)

The issuer used various external pricing sources to determine the fair value of certain investments. The firm did not test the fair value of these investments beyond comparing their fair value to (1) pricing data that the firm obtained from the same sources used by the issuer or (2) a pricing report prepared by the issuer. (AS 2502.26 and .28)