Explorer

The firm did not perform procedures to test or test controls over the accuracy and completeness of certain issuer-produced information that the firm used in its substantive testing. (AS 1105.10)

The firm did not identify and evaluate the issuer's omission of certain disclosures required under FASB ASC Topic 606 related to a description of the nature of certain services the issuer promised to transfer. (AS 2810.30 and .31)

The issuer recorded certain revenue based on data in an electronic environment that were tracked by an IT system. To test this revenue the firm (1) sent positive confirmation requests to the issuer's customers with revenue over an established threshold and (2) selected a sample of transactions for testing. The following deficiencies were identified: · The firm's confirmation procedures were not sufficient because the firm did not consider whether the issuer's customers would have the information necessary to confirm that the issuer's performance obligations had been satisfied. (AS 2310.26)

The issuer recorded certain revenue based on data in an electronic environment that were tracked by an IT system. To test this revenue the firm (1) sent positive confirmation requests to the issuer's customers with revenue over an established threshold and (2) selected a sample of transactions for testing. The following deficiencies were identified: · The firm did not evaluate whether the transaction prices allocated to the issuer's performance obligations were based on standalone selling prices. (AS 2301.08 and .13)

For another type of revenue the firm did not perform procedures to test whether the issuer's performance obligation had been satisfied before revenue was recognized. (AS 2301.08 and .13)

The firm did not identify and evaluate the issuer's omission of a required disclosure under FASB ASC Topic 606 related to significant payment terms. (AS 2810.30 and .31)

The issuer evaluated its ability to continue as a going concern and concluded that the substantial doubt was alleviated by its plans. The firm did not sufficiently evaluate the reliability of management's plans because it did not (1) evaluate management's ability to increase revenue and (2) take into account certain conditions and events that could affect revenue growth. (AS 1105.04 and .06; AS 2415.03 .08 and .09)

The issuer engaged a specialist to perform an assessment of its goodwill for possible impairment and the firm selected for testing a control that consisted of the issuer's review of this assessment. The firm did not evaluate the specific review procedures the control owner performed to assess the reasonableness of a significant assumption used in this assessment. (AS 2201.42 and .44)

The firm's approach to substantively test the issuer's goodwill impairment assessment consisted of developing an independent expectation of the fair value of the issuer's single reporting unit as a range using an auditor-employed specialist. The following deficiencies were identified: · The firm did not evaluate whether the auditor-employed specialist's independent expectation of the fair value as a range encompassed only reasonable outcomes and was supported by sufficient appropriate audit evidence. (AS 1201.C6 and .C7; AS 2501.25)

The firm's substantive procedures to test the unit cost of inventory consisted of (1) selecting a sample of raw materials for testing and (2) testing the issuer's process for allocating labor and overhead costs to inventory. The following deficiencies were identified: · The firm did not perform any procedures to evaluate whether inventory was recorded at the lower of cost or net realizable value. (AS 2301.08)

The firm's approach to substantively test the issuer's goodwill impairment assessment consisted of developing an independent expectation of the fair value of the issuer's single reporting unit as a range using an auditor-employed specialist. The following deficiencies were identified: · The firm did not identify that the auditor-employed specialist did not perform procedures to evaluate the relevance of data from external sources it used to develop the independent expectation as a range. (AS 1105.04 and .06; AS 1201.C6 and .C7)

The issuer estimated the cost of certain inventory using various significant assumptions. The firm's approach for substantively testing the valuation of this inventory was to test the issuer's process. The following deficiencies were identified: · The firm's approach for evaluating the reasonableness of certain significant assumptions was to develop expectations of these assumptions. The firm did not perform sufficient procedures to demonstrate it had a reasonable basis for its expectations because it limited the development of these expectations to the results of its tests of certain varieties of inventory items. (AS 2501.16)

The issuer estimated the cost of certain inventory using various significant assumptions. The firm's approach for substantively testing the valuation of this inventory was to test the issuer's process. The following deficiencies were identified: · The firm did not perform procedures to test or test controls over the accuracy and/or completeness of certain issuer-produced information that the firm used in its substantive testing of inventory. (AS 1105.10)

The firm did not perform procedures to test or test controls over the accuracy and completeness of certain issuer-produced information that it used in its testing of (1) certain revenue and (2) the issuer's disclosure related to the remaining performance obligations. (AS 1105.10)

The firm did not perform any substantive procedures to test intangible assets for possible impairment. (AS 2301.08)

The firm's internal inspection program had inspected this audit and reviewed the ITGCs area and also identified the deficiency below. The issuer used an IT system to initiate process and record transactions related to certain expenses and long-lived assets. The firm identified various control deficiencies in its testing of ITGCs over this system but did not sufficiently evaluate whether these deficiencies represented a material weakness because the firm did not evaluate the magnitude of the potential misstatements resulting from these deficiencies. (AS 2201.62)

The firm's internal inspection program had inspected this audit and reviewed the ITGCs area and also identified the deficiency below. The issuer used an IT system to initiate process and record transactions related to certain expenses and long-lived assets. In its testing of controls over these accounts the firm tested various IT-dependent manual controls that used data and reports generated from this system. As a result of this deficiency in the firm's evaluation 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 the ITGCs area and also identified the deficiency below. The issuer included payroll and other costs as components of these expenses which were affected by the audit deficiencies discussed above. The following additional deficiencies were identified: · The firm did not evaluate whether the controls it selected for testing were designed to address the risk of whether the issuer had appropriately classified these payroll and other costs. (AS 2201.42)

The firm's internal inspection program had inspected this audit and reviewed the ITGCs area and also identified the deficiency below. The issuer included payroll and other costs as components of these expenses which were affected by the audit deficiencies discussed above. The following additional deficiencies were identified: · The firm did not perform any substantive procedures to test whether the issuer had appropriately classified these payroll costs. (AS 2301.08)

The firm's internal inspection program had inspected this audit and reviewed the ITGCs area and also identified the deficiency below. The firm selected for testing a control which was affected by the audit deficiencies discussed above that included the issuer's review of certain long-lived assets for possible impairment. The firm did not evaluate the specific review procedures that the control owner performed to assess certain indicators of possible impairment. (AS 2201.42 and .44)

The firm did not perform any substantive procedures to test the issuer's reserve for excess and obsolete inventory. (AS 2501.07)

The firm's internal inspection program had inspected this audit and reviewed the ITGCs area and also identified the deficiency below. The firm did not perform any substantive procedures to test these long-lived assets for possible impairment. (AS 2301.08)

The issuer recognized revenue from contracts with customers that included an estimate of variable consideration in the transaction price; the issuer estimated this variable consideration using a portfolio of contracts approach. The following deficiencies were identified: · The firm did not evaluate whether the issuer's method to estimate variable consideration was in conformity with FASB ASC Topic 606 and appropriate for the nature of the revenue. (AS 2501.10)

The issuer recognized revenue from contracts with customers that included an estimate of variable consideration in the transaction price; the issuer estimated this variable consideration using a portfolio of contracts approach. The following deficiencies were identified: · The firm used an issuer-prepared schedule of cash receipts by invoice in its substantive testing of the variable consideration estimate. The firm did not sufficiently test or test controls over the accuracy of this schedule because it did not perform procedures to evaluate whether the cash receipts throughout the period related to the associated invoices. (AS 1105.10)

The sample size the firm used in its substantive procedures to test this revenue was too small to provide sufficient appropriate audit evidence because in determining the sample size the firm did not take into account tolerable misstatement the allowable risk of incorrect acceptance and the characteristics of the population. (AS 2315.16 .23 and .23A)

The issuer used forecasted financial information in its evaluation of its ability to continue as a going concern and concluded that substantial doubt was alleviated by its plans. In evaluating management's plans the firm did not sufficiently evaluate the reliability of the issuer's forecasted financial information as follows: · The firm compared the forecasted revenue to the issuer's results subsequent to year end but did not evaluate the significant difference it identified. Further the firm did not evaluate whether the issuer's recent reduction in workforce would affect its ability to achieve its forecasted revenue growth. (AS 1105.04 and .06; AS 2415.03 .08 and .09)

The issuer used forecasted financial information in its evaluation of its ability to continue as a going concern and concluded that substantial doubt was alleviated by its plans. In evaluating management's plans the firm did not sufficiently evaluate the reliability of the issuer's forecasted financial information as follows: · The firm did not compare certain forecasted expenditures with the issuer's results subsequent to year end. (AS 1105.04 and .06; AS 2415.09)

During the year the issuer entered into certain equity-related agreements; the issuer accounted for each of these agreements as one or more derivatives. The following deficiencies were identified: · The firm did not evaluate whether the issuer's accounting for one of these agreements was in conformity with FASB ASC Topic 815 Derivatives and Hedging. (AS 2301.08)

During the year the issuer entered into certain equity-related agreements; the issuer accounted for each of these agreements as one or more derivatives. The following deficiencies were identified: · The firm's approach to substantively test the fair values of these derivatives at issuance and year end was to test the issuer's process. The firm did not perform procedures to evaluate the reasonableness of certain significant assumptions used in the valuation of these derivatives at issuance and year end beyond reading an issuer-prepared memorandum and inquiring of management and for one of the agreements a counterparty. (AS 2501.16)

During the year the issuer entered into certain equity-related agreements; the issuer accounted for each of these agreements as one or more derivatives. The following deficiencies were identified: · The firm did not identify and evaluate the issuer's omission of certain disclosures required under FASB ASC Topic 820 related to the valuation of these derivatives at issuance and year end. (AS 2810.30 and .31)

The firm did not perform any substantive procedures to test the issuer's compliance with certain financial debt covenants. (AS 2301.08)

The firm's substantive procedures to test revenue included selecting samples of transactions for testing. The following deficiencies were identified: · The firm did not perform procedures to test or test controls over the completeness of the populations it used to make its selections. (AS 1105.10)

The firm did not identify and evaluate (1) a misstatement in the issuer's statement of cash flows related to proceeds and repayments of debt; (2) the issuer's omission of a required disclosure under FASB ASC Topic 210 Balance Sheet related to the remaining borrowing capacity for certain debt; and (3) misstatements in certain disclosures required under FASB ASC Topic 820 and FASB ASC Topic 825 Financial Instruments related to the issuer's accounting for and measurement of certain other debt. (AS 2810.30 and .31) In connection with our review the issuer reevaluated its presentation of the statement of cash flows and concluded that a misstatement existed that had not been previously identified. The issuer corrected this misstatement in a subsequent filing.

The issuer performed an assessment of certain of its long-lived assets for possible impairment at year end and concluded that the carrying value of these assets was recoverable. The firm did not identify that the issuer did not consider certain indicators of possible impairment in its assessment of these assets. (AS 2301.08; AS 2810.03)

The issuer used various service organizations for the custody recordkeeping and processing of investment transactions and these service organizations used sub-service organizations for certain functions. For certain sub-service organizations and one service organization the firm did not obtain an understanding of or test any relevant controls for the year under audit. (AS 2201.39 and .B19)

The firm obtained the service auditor's reports for certain of these service organizations and identified certain complementary user controls that the service auditor's reports described as necessary. The following deficiencies were identified: · The firm selected for testing a complementary user control that addressed the issuer's review of updates to its investment policies but did not test the design and operating effectiveness of this control. (AS 2201.39 and .B22)

The firm obtained the service auditor's reports for certain of these service organizations and identified certain complementary user controls that the service auditor's reports described as necessary. The following deficiencies were identified: · The firm did not perform any procedures to evaluate whether the issuer implemented certain other complementary user controls as described in the service auditor's reports. (AS 2201.39 and .B22)

For one business unit the firm did not perform any procedures to identify and select journal entries and other adjustments for testing without having an appropriate basis for excluding this business unit. (AS 2401.61)

The firm did not identify and evaluate the issuer's omission of certain disclosures required under FASB ASC Topic 606 related to revenue that is recognized over time. (AS 2810.30 and .31)

The issuer recognized revenue from certain contracts over time using an input method based on costs incurred. The following deficiencies were identified: · The firm did not perform substantive procedures to evaluate whether the costs incurred had been allocated to the appropriate contract. (AS 2301.08 and .13)

The issuer recognized revenue from certain contracts over time using an input method based on costs incurred. The following deficiencies were identified: · The firm used certain labor information in its substantive testing of the costs incurred but did not test or test controls over the accuracy of this information. (AS 1105.10)

During the year the issuer engaged a specialist to perform a quantitative assessment of goodwill for one reporting unit for possible impairment. The firm used an auditor-employed specialist to evaluate certain significant assumptions used in the issuer's assessment. For certain of these significant assumptions the firm did not identify that the auditor-employed specialist did not (1) perform procedures beyond inquiring of the company's specialist to evaluate the reasonableness of these assumptions and (2) evaluate the relevance and/or reliability of certain data from an external source the company's specialist used to develop these assumptions. (AS 1105.A8a and .A8b; AS 1201.C6 and .C7)

The firm's substantive procedures to test revenue included selecting samples of transactions for testing. The following deficiencies were identified: · The issuer recognized certain of this revenue upon (1) delivery and customer acceptance of products or (2) completion of its services. For certain selections the firm did not perform procedures to test whether (1) the customer had accepted the products or (2) the issuer had completed its services. (AS 2301.08 and .13)

At year end the issuer concluded that it was not necessary to perform an additional quantitative assessment of goodwill for this reporting unit. The firm did not sufficiently evaluate the issuer's conclusion because it did not evaluate the issuer's basis for concluding that certain events and circumstances that occurred during the year did not indicate that it was more likely than not that the fair value of this reporting unit was below its carrying amount. (AS 2301.08; AS 2810.03)

The issuer performed assessments of certain intangible assets for possible impairment using various significant assumptions. The firm's approach to evaluate these impairment assessments was to test the issuer's process. The firm did not perform procedures beyond inquiring of management to evaluate the reasonableness of certain significant assumptions used in these impairment assessments. (AS 2501.16)

The issuer reported convertible debt that was measured at fair value. The firm did not perform procedures beyond inquiring of management to evaluate the reasonableness of a significant assumption used by the issuer to determine the fair value of the convertible debt. (AS 2501.16)

The issuer reported warrants that were recorded as liabilities. The firm did not identify and evaluate the issuer's omission of and a misstatement in certain required disclosures under FASB ASC Topic 820 related to these warrants. (AS 2810.30 and .31)

The firm used information obtained from external parties to test revenue. The firm did not perform any procedures to evaluate the relevance and reliability of this information. (AS 1105.04 and .06)

The firm did not identify and evaluate the significance to the financial statements of the issuer's omission of disclosures required by FASB ASC Topic 606 Revenue from Contracts with Customers regarding transition and performance obligation information. (AS 2810.30 and .31)

The issuer recorded the issuance of preferred stock for settlement of debt even though the shares of preferred stock were not issued as of year end. The firm did not evaluate whether the issuer's accounting for the transaction was in conformity with FASB ASC Subtopic 405-20 Liabilities – Extinguishments of Liabilities. (AS 2810.30)