Explorer

The firm did not request the confirmation of accounts receivable or document how it overcame the presumption to perform confirmation procedures. (AS 2310.34 and .35)

The firm did not perform any substantive procedures to test certain inventory. (AS 2301.08)

Deficiencies testing an automated IT control and evaluating third-party reports relied on for revenue and contract liabilities.

Deficiency identifying a required related-party disclosure departure.

Deficiencies testing inventory reconciliation controls and an undersized inventory observation sample.

Deficiency testing controls over identification of related parties and related-party transactions.

The issuer entered into sales contracts with third-party customers which outlined the specific terms and conditions with the customers. For certain revenue transactions sales orders were generated (and revenue was recognized) based on the quantities of goods sold to the customers that were manually entered into the issuer's accounting system. The following deficiency was identified: • The firm selected for testing a control over the recognition of this revenue that consisted of the issuer's review of new and amended sales contracts. The firm identified a deficiency in the design effectiveness of the control during its interim testing. To test the remediation of this control deficiency the firm selected and tested a sample of new and amended sales contracts once the issuer remediated the deficiency. The firm did not perform procedures to test or test any controls over the completeness of the population of new and amended sales contracts from which it made its selections for testing. (AS 1105.10)

The firm did not identify and evaluate a departure from the applicable financial reporting framework related to the issuer's omission of certain disclosures related to intangible assets required by the framework. (AS 2810.30 and .31)

The principal auditor identified certain long-lived assets as a significant account and the existence and valuation of those assets as relevant assertions. The following deficiency was identified: • The firm did not perform any substantive procedures to test the existence and valuation of these long-lived assets. (AS 2301.08)

The issuer entered into sales contracts with third-party customers which outlined the specific terms and conditions with the customers. For certain revenue transactions sales orders were generated (and revenue was recognized) based on the quantities of goods sold to the customers that were manually entered into the issuer's accounting system. The following deficiency was identified: • The firm selected for testing a control over the recognition of this revenue that consisted of the issuer's review of new and amended sales contracts. The firm identified a deficiency in the design effectiveness of the control during its interim testing. To test the remediation of this control deficiency the firm selected and tested a sample of new and amended sales contracts once the issuer remediated the deficiency. The firm did not perform sufficient procedures to test the effectiveness of the issuer's remediation of the control deficiency because approximately 44 percent of the new and amended sales contracts selected to test the remediation were entered into or amended prior to the issuer's remediation of the deficiency. (AS 2201.44)

The issuer entered into sales contracts with third-party customers which outlined the specific terms and conditions with the customers. For certain revenue transactions sales orders were generated (and revenue was recognized) based on the quantities of goods sold to the customers that were manually entered into the issuer's accounting system. The following deficiencies were identified: • The firm identified a process risk point over the recognition of this revenue that did not have an associated control and concluded that a design effectiveness deficiency existed. The firm identified and tested compensating controls that it believed would mitigate the deficiency. The firm did not identify that these compensating controls did not address the risk of material misstatement related to the entry of incorrect quantities of goods sold into the issuer's accounting system. (AS 2201.68)

The firm used an auditor-employed specialist to assist it with evaluating the reasonableness of a significant assumption used by the issuer to estimate the fair value of a certain liability. To evaluate the reasonableness of the assumption the auditor-employed specialist developed an expectation of the assumption using certain external data. The following deficiency was identified: • The firm selected for testing a control that consisted of the issuer's review of the assumption. The firm did not evaluate the criteria the control owners used to identify matters for follow-up when assessing the reasonableness of the assumption. (AS 2201.42 and .44)

The firm used an auditor-employed specialist to assist it with evaluating the reasonableness of a significant assumption used by the issuer to estimate the fair value of a certain liability. To evaluate the reasonableness of the assumption the auditor-employed specialist developed an expectation of the assumption using certain external data. The following deficiency was identified: • The firm did not sufficiently evaluate the work of the auditor-employed specialist as it did not identify that the auditor-employed specialist's work did not provide sufficient appropriate audit evidence regarding the significant assumption and perform additional procedures or request the auditor-employed specialist to perform additional procedures as necessary to address the deficiency. (AS 1201.C6 and .C7)

The firm used an auditor-employed specialist to assist it with evaluating the reasonableness of a significant assumption used by the issuer to estimate the fair value of a certain liability. To evaluate the reasonableness of the assumption the auditor-employed specialist developed an expectation of the assumption using certain external data. The following deficiency was identified: • The auditor-employed specialist did not perform sufficient procedures to evaluate the relevance of the external data when developing the expectation of the significant assumption. (AS 1105.04 and .06)

The firm did not identify and evaluate a departure from the applicable financial reporting framework related to the issuer's omission of certain disclosures related to intangible assets required by the framework. (AS 2810.30 and .31)

The issuer evaluated certain goodwill for impairment using a discounted cash flow model which was developed using various assumptions. The firm's approach for substantively testing this goodwill for impairment was to test the issuer's process. The firm did not perform procedures to evaluate the reasonableness of certain significant assumptions used by the issuer to evaluate this goodwill for impairment beyond for certain assumptions comparing the assumptions to the most recent approved budget and prior year impairment tests performing a sensitivity analysis and inquiring of management and for certain other assumptions comparing the assumptions to the most recent approved budget and prior year impairment tests. (AS 2501.16)

The firm's substantive procedures to test certain inputs used by the issuer to record intangible assets included the performance of analytical procedures. For certain of these inputs the firm did not (1) determine for one of these inputs whether the expectation used in the analytical procedures was based on predictable relationships and (2) perform procedures to evaluate significant differences between the expected input and actual input used by the issuer beyond inquiry of management. (AS 2305.13 .14 and .21)

The firm selected for testing a control that consisted of management's review of the assumptions used in the issuer's models to estimate the recoverable amount of goodwill. The firm did not evaluate the review procedures that the control owner 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 management's monthly review of the journal entry recorded to adjust revenue for undelivered shipments. The firm did not evaluate the review procedures that the control owner 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 tested automated controls over certain of the issuer's revenue in a non-production information technology (IT) environment rather than in the production IT environment that the issuer used to record revenue. The firm did not perform sufficient procedures to test these automated controls because the firm did not perform procedures to determine whether the issuer's non-production IT environment was identical to the issuer's production IT environment until several months after its testing of the controls. (AS 2201.44)

The issuer used multiple information technology ('IT') systems and applications to process and record transactions including those related to revenue and certain accruals. In its testing over these accounts at two of the issuer's components the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT systems that depended on effective IT general controls (ITGCs). As a result of deficiencies in the firm's testing of ITGCs at these components the firm's testing of these automated and IT-dependent manual controls was not sufficient. (AS 2201.46)

The issuer used multiple information technology ('IT') systems and applications to process and record transactions including those related to revenue and certain accruals. In its testing over these accounts at two of the issuer's components the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT systems that depended on effective IT general controls (ITGCs). The firm selected for testing a control over developer access in which changes to certain applications were managed by corresponding change management tools. The firm did not evaluate whether (1) changes to the applications were managed only by each application's respective change management tool and (2) access to a user ID with the ability to migrate changes within the system was given to certain users that were not developers. Further the firm did not test whether other user groups or profiles within one change management tool had the ability to migrate changes within the systems managed by that tool. (AS 2201.42 and .44)

The issuer used multiple information technology ('IT') systems and applications to process and record transactions including those related to revenue and certain accruals. In its testing over these accounts at two of the issuer's components the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT systems that depended on effective IT general controls (ITGCs). The firm selected for testing various change management controls over these IT systems. The firm did not perform sufficient procedures to test the completeness of the population of changes from which it made its selections because the firm's procedures were limited to (1) observing the parameters used to extract data from the ticketing systems and (2) obtaining a usage report of shared user IDs with the ability to migrate changes from a tool without evaluating which applications were managed by the tool. (AS 1105.10)

The issuer used multiple information technology ('IT') systems and applications to process and record transactions including those related to revenue and certain accruals. In its testing over these accounts at two of the issuer's components the firm tested various automated and IT-dependent manual controls that used data and reports generated or maintained by the IT systems that depended on effective IT general controls (ITGCs). The issuer identified an incident of unauthorized access to its IT systems and as a result determined that certain of its ITGCs were deficient. The firm did not evaluate the severity of these control deficiencies to determine whether the deficiencies in combination with other deficiencies constituted a material weakness. (AS 2201.62)

The firm did not perform any substantive procedures to test or sufficiently test controls over the accuracy and completeness of data produced by these IT systems that it used to test certain accruals. (AS 1105.10)

The firm selected for testing manual journal entries meeting certain fraud criteria. The firm did not perform sufficient procedures to test these journal entries because it did not examine the underlying support for the entries. (AS 2401.61)

The firm did not identify and test any controls over the calculation of inventory cost. (AS 2201.39)

The firm selected for testing a control that consisted of the validation of models used by the issuer to value certain assets and liabilities. The firm did not evaluate the specific review procedures that the control owners performed to validate the models including the procedures performed to determine whether each model was appropriate for its intended use and to evaluate model performance. (AS 2201.42 and .44)

The firm selected for testing a control that consisted of the validation of models used by the issuer to value certain assets and liabilities. The firm did not identify and test any controls over the accuracy and completeness of the data used in the operation of this control. (AS 2201.39)

The firm identified multiple deficiencies in the issuer's controls over certain assets and liabilities that it had selected for testing. The firm did not evaluate the severity of each control deficiency to determine whether the deficiency in combination with other deficiencies constituted a material weakness. (AS 2201.62)

The firm did not sufficiently test certain receivables because the firm did not perform procedures to test the collectability of such receivables beyond inquiries of management and reviewing an aging schedule. (AS 2301.08)

The firm did not evaluate the appropriateness of the issuer's classification of these receivables as current assets in conformity with FASB ASC Topic 210 Balance Sheet. (AS 2810.30 and .31)

The firm sent positive confirmation requests to the issuer's customers for a sample of accounts receivable. For certain items in its sample the responses were returned by email. The firm did not consider performing procedures to verify the source of these responses. (AS 2310.29)

The firm sent positive confirmation requests to the issuer's customers for a sample of accounts receivable. For positive confirmations that were not returned the firm did not perform alternative procedures that provided sufficient appropriate audit evidence that the recorded amounts of the receivables were accurate as of the confirmation date. (AS 2310.31)

The firm did not identify and evaluate departures from GAAP related to the issuer's omission of certain disclosures required by FASB ASC Topic 825 Financial Instruments. (AS 2810.30 and .31)

The firm did not identify and evaluate a departure from GAAP related to certain errors in a disclosure required by FASB ASC Topic 944 Financial Services - Insurance. (AS 2810.30 and .31)

The issuer recognized revenue as services were provided and accrued revenue and recorded accounts receivable for services provided but not yet billed. The firm identified an elevated inherent risk related to certain revenue that was recognized over time. The following deficiency was identified: · The firm selected for testing controls over certain revenue and accounts receivable and tested the controls through the second quarter of the year under audit. The firm did not perform procedures to update the results of its testing from this interim date to year end beyond inquiry of management. (AS 2201.55)

The issuer recognized revenue as services were provided and accrued revenue and recorded accounts receivable for services provided but not yet billed. The firm identified an elevated inherent risk related to certain revenue that was recognized over time. The following deficiency was identified: · The sample sizes the firm used in certain of its substantive procedures to test revenue and accounts receivable were too small to provide sufficient appropriate audit evidence because these procedures were designed based on a level of control reliance that was not supported due to the deficiencies in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The issuer recognized revenue as services were provided and accrued revenue and recorded accounts receivable for services provided but not yet billed. The firm identified an elevated inherent risk related to certain revenue that was recognized over time. The following deficiency was identified: · The firm did not perform procedures to test or test any controls over the accuracy and completeness of certain issuer-produced system generated information it used to test unbilled revenue and accounts receivable. (AS 1105.10)

For certain services the issuer offered discounts rebates and other concessions (collectively 'price adjustments') to customers and recognized revenue based on the gross invoiced price less any applicable price adjustments. To test revenue recognized from these services the firm selected a sample of customer invoices and agreed the net invoiced amounts to cash collections. The firm did not perform any substantive procedures to test the accuracy of the gross invoiced prices and applicable price adjustments. (AS 2301.08)

The firm was instructed by the principal auditor to perform procedures to test journal entries and other adjustments to address the risk of management override of controls around the financial reporting processes at the group level. The firm identified fraud criteria to identify and select journal entries for testing and communicated the criteria to the principal auditor. The firm did not perform procedures to identify and test journal entries that met one of the criteria. (AS 2401.61)

The issuer used various models and assumptions to determine the estimate. The following deficiencies were identified: · The firm selected for testing controls that consisted of the review and approval of certain assumptions used to determine the estimate. The firm did not identify and test any controls over the accuracy and completeness of data used in the operation of these controls. (AS 2201.39)

The sample sizes the firm used in certain of its substantive procedures to test revenue and accounts receivable were too small to provide sufficient appropriate audit evidence because these procedures were designed based on a level of control reliance that was not supported due to the deficiencies in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm did not identify and test any controls over the (1) recording of additions and disposals of long-lived assets including whether these were recorded in the correct period (2) classification of long-lived assets and whether these were depreciated over the appropriate useful lives and (3) configuration of the system responsible for the calculation of depreciation expense. (AS 2201.39)

The sample sizes the firm used in certain of its substantive procedures to test long-lived assets were too small to provide sufficient appropriate audit evidence because these procedures were designed based on a level of control reliance that was not supported due to the deficiencies in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The firm did not test whether (1) long-lived assets were appropriately classified to ensure that these assets were depreciated over the appropriate useful lives and (2) all disposals of long-lived assets were recorded by the issuer. (AS 2301.08)

The issuer used various models and assumptions to determine the estimate. The following deficiencies were identified: · The firm did not identify and test any controls over the monitoring of the models to determine whether the models remained suitable for their intended purpose or if revisions to the models were necessary. (AS 2201.39)

The issuer used various models and assumptions to determine the estimate. The following deficiencies were identified: · The firm selected for testing controls that consisted of annual reviews and approvals of (1) the methodologies (2) new and revised models and (3) certain key inputs and assumptions used by the issuer to determine a portion of the estimate. Certain annual reviews and approvals of the methodologies and new and revised models did not operate during the current year and the firm tested instances of these controls which operated in the prior year. The firm's testing of these controls did not provide sufficient appropriate audit evidence of the controls' operating effectiveness as of the date of management's assessment of ICFR due to the (1) length of time that had passed between the instances of the controls the firm tested and the date of management's assessment (2) higher risk associated with the controls and (3) sensitivity and complexity of the models covered by the controls. (AS 2201.46 and .52)

The issuer used various models and assumptions to determine the estimate. The following deficiencies were identified: · The firm selected for testing controls that consisted of annual reviews and approvals of (1) the methodologies (2) new and revised models and (3) certain key inputs and assumptions used by the issuer to determine a portion of the estimate. Certain annual reviews and approvals of the methodologies and new and revised models did not operate during the current year and the firm tested instances of these controls which operated in the prior year. For certain of the controls over the methodologies new and revised models and certain key inputs and assumptions the firm did not evaluate the review procedures that the control owners performed including the procedures to identify items for follow up and procedures to determine whether those items were appropriately resolved. (AS 2201.42 and .44)

The issuer used various models and assumptions to determine the estimate. The following deficiencies were identified: · The firm selected for testing two other controls that consisted of the review and approval of certain assumptions or data supporting the assumptions used by the issuer to determine another portion of the estimate. For one of these controls the firm did not test an aspect of the control related to an annual update of the assumptions. Further the firm did not sufficiently test the completeness of the report from which it selected its samples to test the design and operating effectiveness of the control because the firm did not agree the report data to the source system. For the other control the firm did not test an aspect of the control related to an annual update of the data supporting the assumptions. (AS 2201.42 and .44)