Explorer

The firm did not identify and evaluate the significance to the notes related to the financial statements of the issuer's omission of a required disclosure under FASB ASC Topic 235 Notes to Financial Statements regarding its revenue recognition accounting policy for certain revenue. (AS 2810.30 and .31)

The issuer placed items in deposit suspense accounts when the items needed further evaluation or processing. The firm selected for testing a control that included a review of the issuer's deposit suspense account reconciliations. The firm did not evaluate the review procedures that the control owner performed including the assessment of whether items that had been cleared from the suspense accounts had been appropriately resolved. (AS 2201.42 and .44)

The firm selected for testing a control that included a review of the issuer's deferred tax assets and liabilities roll-forward schedule. The control owners used certain supporting schedules in the performance of this control but the firm did not identify and test any controls over the accuracy and completeness of the supporting schedules. (AS 2201.39)

The firm did not perform any substantive procedures to test these loans receivable including unfunded commitments. (AS 2301.08)

For certain other types of loans including unfunded commitments the firm sent positive confirmation requests to the issuer's customers for a selection of loans. For confirmations that were not returned the firm did not perform alternative procedures that provided sufficient evidence that the account balances were accurate as of the confirmation date. Further for the confirmations that were returned with exceptions the firm did not evaluate the nature of those exceptions. (AS 2310.31 and .33)

The firm did not identify that at the time of the audit the issuer's recognition of certain revenue from arrangements with multiple elements that consisted of software license and maintenance deliverables was not in conformity with FASB ASC Subtopic 985-605 Software Revenue Recognition. (AS 2810.30) In connection with our review the issuer reevaluated its accounting for these arrangements and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently restated its financial statements and the firm revised and reissued its report on the financial statements. The issuer also reevaluated its controls over the accounting for these arrangements 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 recognized certain revenue from contracts using the percentage-of-completion method. The following deficiencies were identified: · The sample sizes the firm used in certain of its substantive procedures to test certain contracts 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 certain other revenue from contracts based on costs incurred. The following deficiencies were identified: · The firm did not identify and test any controls over the costs incurred to date for these contracts including whether these costs were allowable under the contracts. (AS 2201.39)

The issuer recognized certain other revenue from contracts based on costs incurred. The following deficiencies were identified: · The firm did not perform any substantive procedures to test the completeness of the costs incurred to date and whether the costs incurred were allowable under the contracts. (AS 2301.08)

During the year the issuer acquired a business. The firm did not identify and test controls that addressed the valuation of certain assets acquired and liabilities assumed. (AS 2201.39) In connection with our review the issuer reevaluated its controls over the valuation of these assets acquired and liabilities assumed 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 did not test or in the alternative test any controls over the completeness of a system-generated report that it used to make its selections to test the operating effectiveness of a control over the allocation of acquisition-related costs. (AS 1105.10)

The firm did not perform any substantive procedures to assess the reasonableness of management's assertion that the book value of the acquired property plant and equipment approximated its fair value. (AS 2502.26 and .28)

The issuer recognized revenue from certain contracts that provided for the reimbursement of (1) employee-related costs which the issuer calculated using the time incurred by its employees to perform certain services under these contracts and (2) other expenses incurred by the issuer. The following deficiencies were identified: · The firm selected for testing a control that included a review of the employee-related costs and other expenses. The firm did not evaluate the specific review procedures the control owners performed to assess (1) the appropriateness of the time used to calculate the employee-related costs and (2) whether the other expenses were reimbursable under these contracts. (AS 2201.42 and .44)

The issuer recognized revenue from certain contracts that provided for the reimbursement of (1) employee-related costs which the issuer calculated using the time incurred by its employees to perform certain services under these contracts and (2) other expenses incurred by the issuer. The following deficiencies were identified: · The firm selected for testing a control that included a review of the employee-related costs and other expenses. The firm did not identify and test any controls over the accuracy and completeness of the time and expense information that the control owners used in the performance of this control. (AS 2201.39)

The issuer recognized revenue from certain contracts that provided for the reimbursement of (1) employee-related costs which the issuer calculated using the time incurred by its employees to perform certain services under these contracts and (2) other expenses incurred by the issuer. The following deficiencies were identified: · The firm did not perform any substantive procedures to evaluate whether the amounts recorded as revenue were reimbursable under these contracts. (AS 2301.08)

The issuer recognized revenue from certain contracts that provided for the reimbursement of (1) employee-related costs which the issuer calculated using the time incurred by its employees to perform certain services under these contracts and (2) other expenses incurred by the issuer. The following deficiencies were identified: · The firm used the issuer's time information in its substantive testing of this revenue. The firm did not test or (as discussed above) test controls over the accuracy and completeness of this information. (AS 1105.10)

The issuer recognized revenue from certain other types of arrangements based on the amount of time incurred to provide professional services and the rates in the agreements with its customers. The firm did not identify and test any controls over the accuracy of the time information that the issuer used to calculate this revenue. (AS 2201.39)

The firm identified a significant deficiency related to the absence of controls over the completeness of purchase order information that the issuer used to calculate accrued expenses. The firm identified and tested one of the controls discussed below to address this significant deficiency. The firm did not identify that this control was not designed to address the completeness of the purchase order information. (AS 2201.68)

The firm selected for testing controls over one type of research and development expenses that consisted of reviews of the calculation of accrued expenses. 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 sample sizes the firm used in certain of its substantive procedures to test this type of research and development expenses 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 selected for testing a control over payroll expenses but did not identify and test any controls over the completeness and in some instances the accuracy of certain payroll information that the issuer used in the performance of this control. (AS 2201.39)

For one business unit the firm selected for testing a control that consisted of the comparison of the invoice price for the sale of a product to the issuer's supporting documentation of the approved price for that product. The firm identified exceptions in the operation of this control and concluded without evaluating the effect of these exceptions on the operating effectiveness of the control that these exceptions did not result in a control deficiency. (AS 2201.48)

For the other business unit the firm did not identify and test any controls that addressed whether customer orders were processed using approved prices. (AS 2201.39)

For each of these business units the firm selected for testing a control that consisted of reviews of manual journal entries related to revenue. The firm did not test the operating effectiveness of these controls beyond inspecting documents that included signatures or other notations that indicated reviews performed as part of the controls had occurred. (AS 2201.44)

The firm selected for testing certain controls over the existence of this inventory. The firm identified exceptions in the operation of these controls and concluded without evaluating the effect of these exceptions on the operating effectiveness of the controls that these exceptions did not result in a control deficiency. (AS 2201.48)

The sample size the firm used in certain of its substantive procedures to test this inventory 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 deficiency in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The issuer entered into contracts with customers at certain of its locations that required revenue to be recognized over time based on costs incurred to date relative to total estimated costs to complete these contracts. The firm excluded from the scope of its audits a large number of these locations. The firm did not (1) evaluate whether the risks of material misstatement the firm identified related to revenue recognized over time for the in-scope locations also applied to the excluded locations and (2) consider whether specific risks of material misstatement related to the issuer's use of centralized service centers to determine the amount of revenue to be recognized over time existed at the excluded locations. (AS 2101.11 and .12; AS 2201.B10)

The firm used the issuer's time information in its substantive testing of this revenue. The firm did not test or (as discussed above) test controls over the accuracy of this information. (AS 1105.10)

The issuer entered into contracts with customers at certain of its locations that required revenue to be recognized over time based on costs incurred to date relative to total estimated costs to complete these contracts. For two locations the firm selected for testing controls that included the review of the estimated costs to complete. The firm did not evaluate the specific review procedures the control owners performed to assess the reasonableness of the estimated costs to complete. (AS 2201.42 and .44)

The issuer entered into contracts with customers at certain of its locations that required revenue to be recognized over time based on costs incurred to date relative to total estimated costs to complete these contracts. For the two locations discussed above the firm did not evaluate the reasonableness of the estimated costs to complete for contracts open at year end beyond (1) comparing in the aggregate for all contracts estimated costs to complete at year end to the estimated costs at the subsequent month end and (2) comparing the gross margin for certain contracts completed during the year to the initial estimated margin for these contracts. (AS 2501.07)

The firm identified a fraud risk related to the potential for management to use manual journal entries to override controls at certain of the issuer's locations. For some of these locations the firm did not perform journal-entry testing to address the risk. (AS 2401.58)

For loans that the issuer assessed collectively for impairment the issuer estimated the ALL using a model that included various loan data as inputs into the model. The issuer's independent loan review group identified numerous discrepancies in the loan data subject to its review during the year and reported these discrepancies to the issuer's ALL committee. The firm did not identify and test any controls that addressed the issuer's evaluation and resolution of these discrepancies. (AS 2201.39)

The sample size the firm used in certain of its substantive procedures to test the accuracy of the loan data input into the model 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 deficiency in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The issuer placed items in deposit clearing or suspense accounts when the items required further evaluation. The firm selected for testing controls that included reviews of daily reconciliations of the issuer's deposit clearing and suspense accounts. The firm did not evaluate the specific review procedures that the control owners performed to understand the nature of reconciling items and assess whether items that had been cleared from those accounts had been appropriately resolved. (AS 2201.42 and .44)

To substantively test deposit liabilities the firm tested certain deposit clearing and suspense account reconciliations. The firm did not test the reconciling items and whether items that had been cleared from those accounts had been appropriately resolved. (AS 2301.08)

During the year the issuer acquired multiple businesses including commercial loan portfolios that consisted of various subtypes. The following deficiencies were identified: · The firm selected for testing a control that consisted of the review of the external valuation reports that the issuer used to determine the fair value of the loans acquired in these business combinations. The firm did not evaluate the specific review procedures that the control owner performed to assess the reasonableness of the prepayment rate assumptions that the external valuation specialist used to estimate the fair value of the acquired commercial loans. (AS 2201.42 and .44)

During the year the issuer acquired multiple businesses including commercial loan portfolios that consisted of various subtypes. The following deficiencies were identified: · To substantively test the acquired commercial loans the firm selected certain loans and for each loan selected evaluated the reasonableness of the prepayment rate the loss given default and the annual loss rate assumptions used to estimate the fair value of these loans by comparing these assumptions to market-based ranges for commercial loans. The firm did not perform procedures to obtain evidence that this market information was precise enough to enable the firm to identify potential material misstatements in the valuation of the various subtypes of the acquired commercial loans. (AS 2502.26 .28 and .31)

During the year the issuer acquired multiple businesses including commercial loan portfolios that consisted of various subtypes. The following deficiencies were identified: · In determining its sample sizes used to test the acquired commercial loans the firm did not take into account tolerable misstatement. As a result the samples that the firm used to test the valuation of these loans were too small to provide sufficient appropriate evidence. (AS 2315.16 .23 and .23A)

The issuer designed its cycle-count procedures at one of its locations to exclude a portion of the inventory from the cycle counts. In evaluating the design of this control the firm did not assess the effect of the issuer excluding this portion of inventory on the control's ability to effectively prevent or detect a material misstatement. (AS 2201.42) In connection with our review the issuer reevaluated its control over this inventory and concluded that a material weakness existed that had not been previously identified. The issuer disclosed the material weakness in a subsequent filing and noted that the material weakness existed as of the date covered by the firm's audit that was subject to our review.

The firm did not identify and test any controls that addressed the accuracy of the prices and quantities that were used to record revenue at two of the issuer's business units. (AS 2201.39)

The sample sizes the firm used in certain of its substantive procedures to test revenue and accounts receivable at these business units 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 deficiency in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

The issuer determined the recorded fair value of its derivatives based on valuations provided by an external valuation specialist. The firm selected for testing a control that consisted of the review of the valuation report prepared by the external valuation specialist including underlying inputs and assumptions. 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 issuer determined the recorded fair value of its derivatives based on valuations provided by an external valuation specialist. The firm selected for testing a control that consisted of the review of the valuation report prepared by the external valuation specialist including underlying inputs and assumptions. The firm did not identify and test any controls over the accuracy and completeness of the information that was used in the operation of this control. (AS 2201.39)

The firm selected for testing a control that consisted of the issuer's review of the appropriateness of the accounting treatment for a convertible debt transaction and related derivatives that the issuer entered into during the year. 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)

Revenue for certain of the issuer's sales transactions was processed by one of the issuer's information-technology ('IT') systems. This system automatically assigned predefined codes to each transaction based on the customer and type of service being provided. These codes were used by the issuer's billing system to record the related revenue. The firm did not identify and test any controls that addressed whether these codes were appropriately assigned by the IT system. (AS 2201.39)

The firm did not identify and test any controls over the accuracy and completeness of certain sales transactions that were manually entered into the IT system for processing. (AS 2201.39)

The sample sizes the firm used in certain of its substantive procedures to test this revenue 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)

For certain of the issuer's operations the firm selected for testing a control that consisted of the review of monthly comparisons of actual revenue by distribution channel and by product category to budgeted amounts. In testing the operating effectiveness of this control the firm did not evaluate the specific review procedures that the control owner performed to investigate identified variances and determine whether items identified for follow up had been appropriately resolved. (AS 2201.44)

The sample sizes the firm used in certain of its substantive procedures to test this revenue 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 deficiency in the firm's control testing discussed above. (AS 2301.16 .18 and .37; AS 2315.19 .23 and .23A)

Due to the deficiency discussed above 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)