- Inspection year
- 2018
- Report date
- 28-Apr-2020
- PCAOB release
- 104-2020-011a
- Audits reviewed
- 52
- Audits w/ Part I.A deficiencies
- 19
- Part I.A deficiency rate
- 37%
- Part I.A deficiencies
- 77
- Part I.B deficiencies
- 6
- Report
- View PDF ↗
Deficiencies (77)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A15 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | For certain consumer loans the firm selected for testing a control that consisted of the issuer's quarterly review of its ALL assumptions and adjustments to the ALL including a review of any exceptions to the issuer's ALL methodology and whether quarterly changes to the ALL were reasonable. The firm did not evaluate certain criteria the control owners used to identify items for follow up related to the review of quarterly changes to the ALL. Further the firm did not evaluate the review procedures the control owners performed to determine whether certain items identified by the control owners for follow up were appropriately resolved. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Allowance for Credit/Loan Losses | The issuer used loan charge-offs as inputs to the determination of the general reserve component of the ALL. The firm did not identify and test any controls over loan charge-offs for one type of these consumer loans. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Allowance for Credit/Loan Losses | As part of the issuer's overall credit risk assessment for corporate loans collectively evaluated for impairment the issuer determined a loan risk rating for each loan based on loan information for each borrower including a borrower risk rating. The following deficiencies were identified: · The firm selected for testing controls that consisted of the independent reviews of the assigned loan risk ratings for corporate loans that met certain criteria. The firm did not identify and test any controls over the accuracy and completeness of the loan information that the control owners used to evaluate the assigned loan risk ratings. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Allowance for Credit/Loan Losses | As part of the issuer's overall credit risk assessment for corporate loans collectively evaluated for impairment the issuer determined a loan risk rating for each loan based on loan information for each borrower including a borrower risk rating. The following deficiencies were identified: · The firm used this loan information in certain of its substantive procedures to evaluate the appropriateness of the issuer's loan risk ratings for these loans. The firm did not test or (as discussed above) test controls over the accuracy and completeness of this information. (AS 2501.11) Both financial statement and ICFR audits | AS 2501.11 | |
| 5 | Allowance for Credit/Loan Losses | As part of the issuer's overall credit risk assessment for corporate loans collectively evaluated for impairment the issuer determined a loan risk rating for each loan based on loan information for each borrower including a borrower risk rating. The following deficiencies were identified: · The issuer used various models to determine the borrower risk ratings for certain corporate loans. The firm did not identify and test any controls over the issuer's evaluation of the appropriateness of these models. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 6 | Allowance for Credit/Loan Losses | As part of the issuer's overall credit risk assessment for corporate loans collectively evaluated for impairment the issuer determined a loan risk rating for each loan based on loan information for each borrower including a borrower risk rating. The following deficiencies were identified: · The firm's approach for testing the ALL for these loans was to review and test management's process. The firm did not perform any procedures to test the calculations in these models. (AS 2501.11) Both financial statement and ICFR audits | AS 2501.11 | |
| 7 | Loans Receivable | The firm did not identify and test any controls over certain types of loans receivable including unfunded commitments. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 8 | Loans Receivable | The firm did not perform any substantive procedures to test these loans receivable including unfunded commitments. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 9 | Loans Receivable | 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) Both financial statement and ICFR audits | AS 2310.31; AS 2310.33 | |
| 10 | Deposit Liabilities | The transaction data for certain retail deposit accounts were transmitted from various source systems to the issuer's retail deposit system to record transactions in the general ledger. The firm did not identify and test any controls over the accuracy and completeness of the data maintained in one of these source systems. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 11 | Deposit Liabilities | The firm sent positive confirmation requests to the issuer's customers for a sample of these retail deposit liabilities. For certain of the items in its sample for which the requested confirmations were not returned the firm did not perform alternative procedures that provided sufficient evidence that the recorded amounts of the deposit liabilities were accurate as of the confirmation date. (AS 2310.31) Both financial statement and ICFR audits | AS 2310.31 | |
| 12 | Deposit Liabilities | The sample size the firm used in certain of its substantive procedures to test these deposit liabilities 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) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.19; AS 2315.23; AS 2315.23A | |
| 13 | Derivatives | The issuer used various models in the valuation of certain derivatives. The firm selected for testing controls over these models that consisted of (1) the validation of the design and construction of models that met certain criteria and (2) the annual review of the models that were not subject to the first control. The firm did not evaluate the review procedures the control owners performed including the criteria the control owners used to identify items for follow up and whether those items were appropriately resolved. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 14 | Derivatives | The firm selected for testing a control that consisted of the review of the categorization of certain derivatives within the fair value hierarchy as set forth in FASB ASC Topic 820 Fair Value Measurement. The firm did not evaluate the specific procedures the control owner performed to assess the reasonableness of the categorization within the fair value hierarchy. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 15 | Derivatives | The firm did not perform any substantive procedures to evaluate the reasonableness of the issuer's categorization of these derivatives within the fair value hierarchy. (AS 2502.43) Both financial statement and ICFR audits | AS 2502.43 |
Issuer B6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Deferred Revenue | The issuer entered into revenue arrangements with multiple elements and allocated the total consideration from these arrangements between the sale of products and services using its best estimate of selling price (“BESP”) under the relative-selling-price method. The issuer determined BESP based on contractual prices or factors of list prices. The firm selected for testing a control that consisted of reviews of the issuer's annual analysis of BESP. The firm did not determine whether the control owners' reviews of this analysis considered whether contractual prices or factors of list prices were the most appropriate selection for BESP. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Deferred Revenue | The firm did not perform any substantive procedures to test the issuer's assertion that contractual prices or factors of list prices were the most appropriate selection for BESP. (AS 2810.30) Both financial statement and ICFR audits | AS 2810.30 | |
| 3 | Deferred Revenue | The firm selected for testing a control that consisted of the review of all of the issuer's sales transactions including multiple-element arrangements for appropriate revenue recognition. The firm did not evaluate whether the control owners assessed whether prices for extended warranty services that were separately stated on customer invoices represented evidence that customers had the option to purchase these services for an expressly stated amount separate from the price of the product which may have affected the revenue allocation. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 4 | Deferred Revenue | The firm did not perform any substantive procedures to evaluate whether prices for extended warranty services that were separately stated on customer invoices represented evidence that customers had the option to purchase these services for an expressly stated amount separate from the price of the products. (AS 2810.30) Both financial statement and ICFR audits | AS 2810.30 | |
| 5 | Inventory | The firm selected for testing an automated control and certain information technology (“IT”) dependent manual controls over inventory that used data or reports that were derived from the issuer's inventory system for which the firm had identified a significant deficiency that was not remediated until the fourth quarter. The firm did not test any instances of the automated control and the controls over the accuracy and completeness of these data and reports subsequent to the remediation of the significant deficiency. (AS 2201.55 and .56) Both financial statement and ICFR audits | AS 2201.55; AS 2201.56 | |
| 6 | Inventory | The firm selected for testing a control over program changes that consisted of the approval testing and monitoring of changes made during the year to the issuer's inventory system. The firm did not identify and test any controls over the completeness of the report that was generated by the inventory system affected by the significant deficiency discussed above and that the firm used to select program changes for testing. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 |
Issuer C8 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Receivable | For certain revenue the firm did not identify and test any controls over the issuer's determination of whether the GAAP requirements that (1) persuasive evidence of an arrangement existed and (2) collectability was reasonably assured were met for transactions recorded as revenue. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Accounts Receivable | The firm selected for testing various controls that consisted of monthly comparisons of this revenue by customer product geographic region and/or business unit to revenue recorded in the prior month. The firm did not evaluate the review procedures that the control owners performed including whether items identified for follow up were appropriately resolved. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 3 | Accounts Receivable | For certain of this revenue the firm selected for testing controls that consisted of a monthly comparison of a sample of invoices to the related prior-month invoice and the investigation of differences. In testing these controls the firm did not inspect the invoices the control owners used in this comparison to determine whether all differences were identified for investigation. (AS 2201.44) Both financial statement and ICFR audits | AS 2201.44 | |
| 4 | Accounts Receivable | 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) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.19; AS 2315.23; AS 2315.23A | |
| 5 | Advanced Billings | The firm tested various controls over certain unbilled accounts receivable advanced billings and deferred revenue that used data from the issuer's billing systems but did not identify and test any controls over the accuracy and completeness of these data. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 6 | Advanced Billings | The firm's substantive procedures to test these accounts consisted of analytical procedures. The firm used data from the issuer's billing systems to develop its expectations but did not test or in the alternative identify and test controls over the accuracy and completeness of these data as discussed above. Further the firm established its thresholds for investigating differences based on a level of control reliance that was not supported due to the deficiency in the firm's testing of controls. As a result the thresholds that the firm used did not provide the desired level of assurance that misstatements that could have been material would be identified. (AS 2301.16 .18 and .37; AS 2305.16 and .20) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2305.16; AS 2305.20 | |
| 7 | Business Combinations | During the year the issuer acquired a business and determined the fair value of an acquired intangible asset using customer attrition-rate assumptions. The following deficiencies were identified: · The firm did not identify and test any controls over the accuracy and completeness of historical revenue data that the issuer used to determine the attrition rates. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 8 | Business Combinations | During the year the issuer acquired a business and determined the fair value of an acquired intangible asset using customer attrition-rate assumptions. The following deficiencies were identified: · The firm's approach for testing the attrition rates was to review and test management's process. The firm did not perform any substantive procedures to test or in the alternative identify and test any controls over the accuracy and completeness of historical revenue data that the issuer used to determine the attrition rates as discussed above. (AS 2502.39) Both financial statement and ICFR audits | AS 2502.39 |
Issuer D6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Receivable | The firm selected for testing a control over manually recorded period-end adjustments to reverse certain revenue for shipped products that had not been delivered to the issuer's customers by the end of the period. The firm did not identify and test any controls over the accuracy and completeness of the shipping terms entered into the revenue system that were used to determine whether adjustments were necessary. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Accounts Receivable | The firm did not identify and test any controls that addressed whether all manual sales orders were entered into the revenue system. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Accounts Receivable | The issuer entered into revenue arrangements with multiple elements and allocated consideration to the deliverables using vendor-specific objective evidence ('VSOE') of fair value or its BESP. The following deficiencies were identified: · The firm identified errors in the issuer's VSOE and BESP analyses and concluded that the issuer's control over the preparation and review of these analyses was not operating effectively as of year end. In determining whether the deficiency represented a material weakness the firm did not sufficiently evaluate the magnitude of the potential misstatements because it limited its procedures to evaluating the known misstatements. (AS 2201.62 and .63) Both financial statement and ICFR audits | AS 2201.62; AS 2201.63 | |
| 4 | Accounts Receivable | The issuer entered into revenue arrangements with multiple elements and allocated consideration to the deliverables using vendor-specific objective evidence ('VSOE') of fair value or its BESP. The following deficiencies were identified: · The firm's approach to substantively test the VSOE and BESP analyses was to review and test management's process. The firm did not test the accuracy and completeness of the stand-alone sales transactions the issuer used in these analyses or in the alternative test any controls over the accuracy and completeness of these transactions. (AS 2501.11) Both financial statement and ICFR audits | AS 2501.11 | |
| 5 | Accounts Receivable | The issuer entered into revenue arrangements with multiple elements and allocated consideration to the deliverables using vendor-specific objective evidence ('VSOE') of fair value or its BESP. The following deficiencies were identified: · In addition the issuer used certain sales order data that it obtained from the revenue system and manually entered into the analyses. The firm did not test or (as discussed above) sufficiently test controls over the completeness of the manually entered sales order data used in the analyses. (AS 2501.11) Both financial statement and ICFR audits | AS 2501.11 | |
| 6 | Accounts Receivable | The sample sizes the firm used in certain of its substantive procedures to test revenue deferred 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) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.19; AS 2315.23; AS 2315.23A |
Issuer E4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Uncorrected Misstatements | The issuer prepared a schedule of numerous uncorrected misstatements that it had identified and that affected several financial statement accounts. The firm did not perform any procedures to determine whether the uncorrected misstatements included on this schedule were accurate and whether there were other uncorrected misstatements that the issuer identified that the firm should have evaluated. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 2 | Uncorrected Misstatements | In addition the firm did not evaluate the effect of the uncorrected misstatements on the specific accounts and disclosures involved. (AS 2810.17) Both financial statement and ICFR audits | AS 2810.17 | |
| 3 | Reinsurance Recoverable | One of the issuer's reinsurance agreements required both parties to maintain certain assets as collateral for the reinsurance recoverable. The firm did not identify and test any controls that addressed whether the assets maintained as collateral by both parties were in compliance with the provisions of the reinsurance agreement. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Reinsurance Recoverable | The firm did not test whether the assets maintained as collateral by both parties were in compliance with the provisions of the reinsurance agreement. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 |
Issuer F2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Proved Oil and Gas Reserves | The firm selected for testing a control that included the review and approval of changes to the inputs that were used by the issuer to determine its proved oil and gas reserves. The number of changes selected for testing did not provide sufficient appropriate audit evidence in light of the volume of changes subject to the control. (AS 2201.46 and .47) Both financial statement and ICFR audits | AS 2201.46; AS 2201.47 | |
| 2 | Proved Oil and Gas Reserves | The sample size the firm used in its substantive procedures to test the appropriateness of certain inputs used to determine the issuer's proved oil and gas reserves 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) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.19; AS 2315.23; AS 2315.23A |
Issuer G3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Inventory | The firm did not identify and test any controls over the accuracy and completeness of the actual costs for raw materials direct labor and overhead that were used by the issuer's inventory system to calculate manufacturing variances between actual and standard costs for the inventory at one of the issuer's locations. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Inventory | 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) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.19; AS 2315.23; AS 2315.23A | |
| 3 | Inventory | The firm did not perform any substantive procedures that addressed the accuracy of the allocation of the direct labor and overhead costs to this inventory. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 |
Issuer H3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | The firm selected for testing a control that consisted of the review of the issuer's risk assessment for graded loans. This review included the determination of which loans would be subject to an independent loan-grade review. The loan grades were an important factor in estimating the ALL. The firm did not evaluate the specific review procedures that the control owner performed to determine which loans would be subject to an independent loan-grade review. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Allowance for Credit/Loan Losses | The issuer used a model in the valuation of the ALL that used various data including historical loan-loss data derived from the issuer's data warehouse systems. The firm did not identify and test any controls over the accuracy of the transfer of these data from the issuer's source systems to the data warehouse systems or test other controls that would have provided evidence over the accuracy of these data. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Allowance for Credit/Loan Losses | The firm's approach for testing the ALL was to review and test management's process. The firm did not perform any substantive procedures to test or in the alternative identify and test any controls over the accuracy of the historical loan-loss data as discussed above. (AS 2501.11) Both financial statement and ICFR audits | AS 2501.11 |
Issuer I6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | For one category of revenue that comprised six types of revenue arrangements the firm selected for testing a control that consisted of a monthly comparison by project type of certain financial information and the investigation of variances over established thresholds. The firm did not evaluate whether certain thresholds the control owners used were sufficiently precise to detect misstatements that could be material. (AS 2201.42 and .44) ICFR audit only | AS 2201.42; AS 2201.44 | |
| 2 | Revenue | In addition the firm did not identify and test any controls over the accuracy of certain data that the control owners used in the performance of this control. (AS 2201.39) ICFR audit only | AS 2201.39 | |
| 3 | Revenue | For four types of these revenue arrangements the firm selected for testing a control that included the review of invoices. The firm did not test the procedures the control owners performed to determine whether the services were provided for the revenue recorded for three of these types of revenue arrangements. (AS 2201.44) ICFR audit only | AS 2201.44 | |
| 4 | Revenue | In addition the firm did not identify and test any controls over the accuracy of certain data that the control owners used in the performance of this control for one of these three types of arrangements. (AS 2201.39) ICFR audit only | AS 2201.39 | |
| 5 | Revenue | For the other two types of revenue arrangements the firm selected for testing controls that consisted of the review and approval of journal entries. The firm did not identify and test any controls over the accuracy of the data that the control owners used in the performance of these controls. (AS 2201.39) ICFR audit only | AS 2201.39 | |
| 6 | Revenue | For another category of revenue the firm selected for testing a control that consisted of the review of revenue transactions greater than an established monetary threshold. The firm did not identify and test any controls over revenue transactions that were less than this established threshold. (AS 2201.39) ICFR audit only | AS 2201.39 |
Issuer J2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Receivable | The firm selected for testing a control over certain revenue and the related accounts receivable that consisted of the review of sales orders the issuer entered into its revenue system. The firm did not identify and test any controls that addressed whether all sales orders were subject to this review. (AS 2201.39) ICFR audit only | AS 2201.39 | |
| 2 | Accounts Receivable | The firm did not identify and test any controls that addressed whether all approved requests for changes in billing rates were processed in the revenue system. (AS 2201.39) ICFR audit only | AS 2201.39 |
Issuer K4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Deferred Revenue | In response to ineffective IT general controls over the general ledger and revenue systems for one of its business units the issuer implemented and the firm selected for testing an annual control at year end that consisted of testing a sample of revenue transactions from the revenue system to determine whether revenue had been appropriately recognized. The following deficiencies were identified: · The firm did not identify that this annual control did not address the accuracy and completeness of the data and reports that were derived from the revenue system throughout the year and used in the operation of certain IT-dependent manual controls that the firm had selected for testing. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 2 | Deferred Revenue | In response to ineffective IT general controls over the general ledger and revenue systems for one of its business units the issuer implemented and the firm selected for testing an annual control at year end that consisted of testing a sample of revenue transactions from the revenue system to determine whether revenue had been appropriately recognized. The following deficiencies were identified: · The firm did not sufficiently test the annual control because the firm did not (1) evaluate whether the issuer's selection process resulted in all transactions having an opportunity of being selected and (2) test the control owner's procedures to determine whether revenue or deferred revenue had been appropriately recorded for certain items selected for testing. Further the firm did not identify and test any controls over the completeness of the reports derived from the revenue system that the control owner used to select transactions for testing. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 3 | Deferred Revenue | In response to ineffective IT general controls over the general ledger and revenue systems for one of its business units the issuer implemented and the firm selected for testing an annual control at year end that consisted of testing a sample of revenue transactions from the revenue system to determine whether revenue had been appropriately recognized. The following deficiencies were identified: · The firm did not identify and test any controls over the accuracy and completeness of the data derived from the general ledger system that were used in the operation of certain IT-dependent manual controls that the firm had selected for testing. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 4 | Deferred Revenue | In response to ineffective IT general controls over the general ledger and revenue systems for one of its business units the issuer implemented and the firm selected for testing an annual control at year end that consisted of testing a sample of revenue transactions from the revenue system to determine whether revenue had been appropriately recognized. The following deficiencies were identified: · 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) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.19; AS 2315.23; AS 2315.23A |
Issuer L2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer generated certain revenue from its distribution of electricity that its customers purchased from other energy companies. The firm selected for testing a control over the volumes of electricity distributed by the issuer. The firm did not identify and test any controls over the accuracy and completeness of the volumes of electricity that the issuer's customers purchased from other energy companies that were used in this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Revenue | The firm used these volume data in its substantive testing of this revenue but did not perform any procedures to test or in the alternative identify and test any controls over the accuracy and completeness of these data as discussed above. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 |
Issuer M4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm selected for testing a control over certain revenue that consisted of a comparison by contract of actual profit to forecasted amounts. The firm did not identify and test any controls over the data and assumptions used to develop the forecasted profits that were used in the performance of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Revenue | The sample size the firm used in certain of its substantive procedures to test this revenue 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) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.19; AS 2315.23; AS 2315.23A | |
| 3 | Inventory | The firm selected for testing a control over the existence of certain inventory that included reviews of the issuer's cycle-count results to assess the reliability of the cycle-count process. The issuer used cycle-count data from its inventory systems to manually prepare the cycle-count analyses that were used in the operation of this control. The firm did not identify and test any controls that addressed whether these analyses were accurate and complete. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Inventory | The sample sizes the firm used in certain of its substantive procedures to test this inventory 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) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.19; AS 2315.23; AS 2315.23A |
Issuer N3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Accounts Receivable | The firm selected for testing controls over adjustments to one type of revenue and related accounts receivable and the gain on the sale of certain real estate assets. The issuer used system-generated reports in the performance of these controls. To test controls over the accuracy and completeness of these reports the firm either relied on testing performed in a prior year or tested one instance of the reports as of an interim date. The firm did not identify and evaluate the nature of the changes that were made to the configuration of these reports after the testing dates to update its conclusion to the date of management's assessment. (AS 2201.55 and .56) Both financial statement and ICFR audits | AS 2201.55; AS 2201.56 | |
| 2 | Accounts Receivable | The sample size the firm used in its substantive procedures to test adjustments to one type of revenue and related accounts receivable 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) Both financial statement and ICFR audits | AS 2301.16; AS 2301.18; AS 2301.37; AS 2315.19; AS 2315.23; AS 2315.23A | |
| 3 | Acquired Real Estate Assets | During the year the issuer acquired certain real estate assets. The firm selected for testing certain controls each of which consisted of the review of a significant assumption used to determine the fair value of these acquired assets. The firm did not evaluate whether certain items that the control owners identified for follow up had been appropriately resolved. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 |
Issuer O2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired numerous businesses. The firm did not identify and test any controls over the valuation of the assets acquired and liabilities assumed in these business combinations. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Business Combinations | The firm did not perform any substantive procedures to test the valuation of the assets acquired and liabilities assumed in these business combinations. (AS 2502.15) Both financial statement and ICFR audits | AS 2502.15 |
Issuer P4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired a business. The firm selected for testing a control that consisted of a review of certain assumptions underlying the cash-flow forecasts that the issuer used to determine the fair value of certain acquired intangible assets. The firm did not evaluate the review procedures performed including the criteria the control owner used to identify items for follow up and whether those items were appropriately resolved. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Business Combinations | In addition the firm did not test the aspect of this control that addressed the accuracy and completeness of certain data used in the valuation of these intangible assets. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 3 | Business Combinations | The firm's approach for testing the fair value of these acquired intangible assets was to review and test management's process. The firm did not sufficiently test the accuracy and completeness of certain data that the issuer used to value these acquired intangible assets because its procedures were limited to comparing certain of these data to schedules the issuer had obtained from the acquired company. (AS 2502.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Business Combinations | In addition the firm did not sufficiently test certain assumptions underlying the forecasted revenue that the issuer used to value one of these intangible assets beyond inquiring of management and comparing these assumptions to an issuer-prepared schedule. (AS 2502.26 and .28) Both financial statement and ICFR audits | AS 2502.26; AS 2502.28 |
Issuer Q1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | 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) Financial statement audit only | AS 2810.30; AS 2810.31 |
Issuer R1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Deposit Liabilities | 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) ICFR audit only | AS 2201.42; AS 2201.44 |
Issuer S1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Income Taxes | 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) ICFR audit only | AS 2201.39 |