- Inspection year
- 2018
- Report date
- 05-Oct-2020
- PCAOB release
- 104-2020-019a
- Audits reviewed
- 17
- Audits w/ Part I.A deficiencies
- 5
- Part I.A deficiency rate
- 29%
- Part I.A deficiencies
- 33
- Part I.B deficiencies
- 1
- Report
- View PDF ↗
Deficiencies (33)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A14 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer recognized certain revenue based on quantity and specified rates. The following deficiencies were identified: · The firm selected for testing a control over the completeness of reported quantities that consisted of management's comparison of the quantity reported by customers to information provided by external parties. The firm did not identify and test any controls over the relevance and reliability of the information provided by the external parties that was used in this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Revenue | The issuer recognized certain revenue based on quantity and specified rates. The following deficiencies were identified: · The firm used the quantities reported by the issuer's customers in its procedures to test this revenue. The firm did not test or in the alternative (as discussed above) sufficiently test the control over the completeness of this data. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 3 | Revenue | The issuer recognized certain revenue based on quantity and specified rates. 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 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 | |
| 4 | Allowance for Doubtful Accounts | The firm selected for testing a control over the allowance for doubtful accounts that included management's review of the aging of accounts receivable and the calculations of the allowance. The firm did not evaluate the review procedures that the control owner performed including the criteria that 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 | |
| 5 | Goodwill | The issuer engaged an external specialist to perform its annual goodwill impairment analysis. The analysis included projected cash flows for four revenue categories provided by the issuer and assumptions developed by the specialist. The following deficiencies were identified: · The firm selected for testing a control that consisted of management's review of the annual goodwill impairment analysis prepared by the specialist. The firm did not evaluate the review procedures that the control owner performed including the criteria that 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 | |
| 6 | Goodwill | The issuer engaged an external specialist to perform its annual goodwill impairment analysis. The analysis included projected cash flows for four revenue categories provided by the issuer and assumptions developed by the specialist. The following deficiencies were identified: · The firm selected for testing a control that consisted of management's review of the annual goodwill impairment analysis prepared by the specialist. The firm did not identify and test any controls over the preparation of the projected cash flows that were provided to the specialist. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 7 | Goodwill | The issuer engaged an external specialist to perform its annual goodwill impairment analysis. The analysis included projected cash flows for four revenue categories provided by the issuer and assumptions developed by the specialist. The following deficiencies were identified: · The firm did not sufficiently test the projected cash flows provided to the specialist because its procedures were limited to inquiring of management and comparing the projected cash flows for one revenue category to another company's historical revenue without performing procedures to evaluate whether that company's historical results would be representative of the issuer's future results. (AS 1210.12) Both financial statement and ICFR audits | AS 1210.12 | |
| 8 | Business Combinations | During the year the issuer acquired certain businesses and engaged an external specialist to estimate the fair values of the acquired intangible assets. The issuer provided the specialist with financial projections and other data that were used in the valuations. The following deficiencies were identified: · The firm selected for testing a control that included management's review of certain assumptions used in the valuations. The firm did not evaluate the review procedures that the control owner performed including the criteria that 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 | |
| 9 | Business Combinations | During the year the issuer acquired certain businesses and engaged an external specialist to estimate the fair values of the acquired intangible assets. The issuer provided the specialist with financial projections and other data that were used in the valuations. The following deficiencies were identified: · The firm selected for testing a control that included management's review of certain assumptions used in the valuations. The firm did not identify and test any controls over the preparation of the financial projections that were provided to the specialist. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 10 | Business Combinations | During the year the issuer acquired certain businesses and engaged an external specialist to estimate the fair values of the acquired intangible assets. The issuer provided the specialist with financial projections and other data that were used in the valuations. The following deficiencies were identified: · The firm did not sufficiently evaluate the sales forecast that was provided to the specialist to value the trade name and customer relationship intangible assets because its procedures were limited to inquiring of management and comparing the forecast to the issuer's historical financial information without performing procedures to evaluate whether the issuer's historical growth rates would be representative of the issuer's future sales growth. (AS 1210.12) Both financial statement and ICFR audits | AS 1210.12 | |
| 11 | Business Combinations | During the year the issuer acquired certain businesses and engaged an external specialist to estimate the fair values of the acquired intangible assets. The issuer provided the specialist with financial projections and other data that were used in the valuations. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of the royalty rate that the specialist used to value the trade name intangible assets because its procedures were limited to comparing the assumptions to industry information obtained by the specialist without evaluating the relevance and reliability of the source of that information. (AS 2502.26 .28 and .31) Both financial statement and ICFR audits | AS 2502.26; AS 2502.28; AS 2502.31 | |
| 12 | Business Combinations | During the year the issuer acquired certain businesses and engaged an external specialist to estimate the fair values of the acquired intangible assets. The issuer provided the specialist with financial projections and other data that were used in the valuations. The following deficiencies were identified: · The firm did not evaluate whether the attrition rates that the specialist used to value the customer relationships intangible assets reflected (1) future retention of the issuer's long-term relationships with its largest customers and (2) those customers' proportionate share of historical sales. (AS 2502.26 .28 and .31) Both financial statement and ICFR audits | AS 2502.26; AS 2502.28; AS 2502.31 | |
| 13 | Business Combinations | During the year the issuer acquired certain businesses and engaged an external specialist to estimate the fair values of the acquired intangible assets. The issuer provided the specialist with financial projections and other data that were used in the valuations. The following deficiencies were identified: · The firm did not evaluate the reasonableness of certain assumptions that the issuer provided to the specialist that the specialist used to estimate the fair value of other acquired intangible assets. (AS 1210.12) Both financial statement and ICFR audits | AS 1210.12 | |
| 14 | Business Combinations | During the year the issuer acquired certain businesses and engaged an external specialist to estimate the fair values of the acquired intangible assets. The issuer provided the specialist with financial projections and other data that were used in the valuations. The following deficiencies were identified: · The firm did not evaluate the issuer's conclusion that separately identifiable intangible assets did not exist related to the revenue expected to be derived from the existing user base of each acquired business in conformity with FASB ASC Topic 805 Business Combinations. (AS 2810.30) Both financial statement and ICFR audits | AS 2810.30 |
Issuer B8 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer recognized revenue from services provided to customers based on certain agreed-upon specifications (“service revenue”). The following deficiencies were identified: · The firm selected for testing certain automated controls that were designed to recognize one type of service revenue once certain information was manually entered into the issuer's system. The firm did not identify and test any controls over the accuracy and completeness of the information that was manually entered into the issuer's system. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Revenue | The issuer recognized revenue from services provided to customers based on certain agreed-upon specifications (“service revenue”). The following deficiencies were identified: · The firm selected for testing a control that included management's review of billing information for the service revenue discussed above. The firm did not evaluate the review procedures that the control owner performed including the criteria that 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 | |
| 3 | Revenue | The issuer recognized revenue from services provided to customers based on certain agreed-upon specifications (“service revenue”). The following deficiencies were identified: · The firm did not identify and test any controls over another type of service revenue. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Revenue | The issuer recognized revenue from services provided to customers based on certain agreed-upon specifications (“service revenue”). The following deficiencies were identified: · The firm selected a sample of invoices to perform its substantive testing of both types of service revenue. For certain of the items selected the firm compared the invoice to a system-generated activity report of service by customer to determine whether the service had been provided in accordance with the customer's order specifications. The firm did not test or in the alternative test controls over the accuracy and completeness of the activity report. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 5 | Revenue | The issuer recognized revenue from services provided to customers based on certain agreed-upon specifications (“service revenue”). The following deficiencies were identified: · The firm selected a sample of invoices to perform its substantive testing of both types of service revenue. For the remaining items selected the system-generated activity report was not relevant to determining whether the service had been provided as it was a different type of service and the firm did not otherwise obtain support to test the occurrence of revenue for these selections. (AS 2315.25) Both financial statement and ICFR audits | AS 2315.25 | |
| 6 | Revenue | The issuer recognized revenue from services provided to customers based on certain agreed-upon specifications (“service revenue”). The following deficiencies were identified: · The sample sizes the firm used in certain of its substantive procedures to test both types of service 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 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 | |
| 7 | Revenue | The issuer also recognized revenue from fees associated with granting certain rights to its customers (“contract revenue”). The firm identified a control deficiency over this revenue related to a lack of segregation of duties and concluded that it was a significant deficiency based on the firm's testing of compensating controls that included management's review of contract revenue and financial reporting checklists. The firm did not evaluate the review procedures that the control owner performed including the criteria that the control owner used to identify items for follow up and whether those items were appropriately resolved. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 8 | Business Combinations | During the year the issuer acquired certain businesses and engaged an external specialist to perform a valuation of the acquired intangible assets. The specialist determined that certain acquired agreements with the issuer's affiliates had no value. The firm did not sufficiently evaluate the reasonableness of the conclusions reached by the specialist because its procedures were limited to verifying that the issuer's accounting treatment was consistent with (1) the accounting treatment used in prior business combinations and (2) certain audit evidence from more than ten years prior to the current year's acquisitions. (AS 2502.26 .28 and .31) Both financial statement and ICFR audits | AS 2502.26; AS 2502.28; AS 2502.31 |
Issuer C4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Asset Retirement Obligations | The issuer used an information technology (“IT”) application to initiate process and record revenue. This IT application also generated information that the issuer used to estimate the ARO. The firm did not identify and test any controls over the accuracy of customer information that was manually entered into the application. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Revenue | The firm selected for testing controls that consisted of management's review of system-generated reports used to recognize revenue. The firm did not test beyond inquiry any controls that addressed the accuracy and completeness of these system-generated reports used in the performance of these controls. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Revenue | The firm did not test or in the alternative test controls over the accuracy and completeness of data the firm used to develop the expectation used in the performance of its substantive analytical procedures to test revenue. (AS 2305.16) Both financial statement and ICFR audits | AS 2305.16 | |
| 4 | Asset Retirement Obligations | The firm selected for testing controls that consisted of management's review of system-generated reports used to recognize ARO. The firm did not test beyond inquiry any controls that addressed the accuracy and completeness of these system-generated reports used in the performance of these controls. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 |
Issuer D5 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | The firm concluded that a control over the loan officers' annual credit review (“ACR”) of the reasonableness of assigned loan grades was deficient because certain of the ACRs were not completed as of the end of the year for commercial loan relationships. The firm concluded that it represented a significant deficiency after determining the percentage of noncompliance of ACRs and identifying and testing two compensating controls that consisted of a credit monitoring (“CM”) control and an independent loan review over certain commercial loan relationships. The firm did not sufficiently evaluate the severity of the control deficiency due to the following: · The firm used the work of internal audit (“IA”) to test the CM control. The firm did not evaluate IA's identification of several instances in which borrower financial information obtained for use in the CM control was not analyzed by the control owners. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 2 | Allowance for Credit/Loan Losses | The firm concluded that a control over the loan officers' annual credit review (“ACR”) of the reasonableness of assigned loan grades was deficient because certain of the ACRs were not completed as of the end of the year for commercial loan relationships. The firm concluded that it represented a significant deficiency after determining the percentage of noncompliance of ACRs and identifying and testing two compensating controls that consisted of a credit monitoring (“CM”) control and an independent loan review over certain commercial loan relationships. The firm did not sufficiently evaluate the severity of the control deficiency due to the following: · The firm selected loan relationships which had ACRs and independently tested the CM control. The firm did not perform procedures to determine whether the CM control operated for the selected loans after the ACRs were performed which would be the only way this compensating control could have mitigated the ACR deficiency identified. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 3 | Allowance for Credit/Loan Losses | The firm concluded that a control over the loan officers' annual credit review (“ACR”) of the reasonableness of assigned loan grades was deficient because certain of the ACRs were not completed as of the end of the year for commercial loan relationships. The firm concluded that it represented a significant deficiency after determining the percentage of noncompliance of ACRs and identifying and testing two compensating controls that consisted of a credit monitoring (“CM”) control and an independent loan review over certain commercial loan relationships. The firm did not sufficiently evaluate the severity of the control deficiency due to the following: · The firm did not test whether the CM control operated effectively over the population of loans for which a required ACR was not performed. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 4 | Allowance for Credit/Loan Losses | The firm concluded that a control over the loan officers' annual credit review (“ACR”) of the reasonableness of assigned loan grades was deficient because certain of the ACRs were not completed as of the end of the year for commercial loan relationships. The firm concluded that it represented a significant deficiency after determining the percentage of noncompliance of ACRs and identifying and testing two compensating controls that consisted of a credit monitoring (“CM”) control and an independent loan review over certain commercial loan relationships. The firm did not sufficiently evaluate the severity of the control deficiency due to the following: · The sample size the firm used to test the second compensating control was designed assuming a certain level of evidence the firm planned to obtain from testing the ACR control over assigned loan grades. Due to the identified control deficiency in the ACR control the ACR control tested did not provide the planned level of evidence. As a result the sample size the firm used to test the second compensating control was too small to provide the necessary evidence about its operating effectiveness. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 5 | Allowance for Credit/Loan Losses | The sample sizes the firm used in certain of its substantive procedures to test the ALL 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 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 E2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | The issuer's ALL included a general reserve comprised of a quantitative component related to historical losses and a qualitative component related to various environmental factors. The firm selected for testing controls over the ALL that consisted of management's and a committee's review and approval of the ALL. The firm did not evaluate the specific review procedures that the control owners performed to evaluate the reasonableness of the assumptions used to determine the qualitative component of the ALL. (AS 2201.42 and .44) ICFR audit only | AS 2201.42; AS 2201.44 | |
| 2 | Business Combinations | During the year the issuer acquired a business. The firm selected for testing a control that consisted of management's review of the assumptions and related supporting documentation used in the valuation of assets acquired and liabilities assumed. The firm did not evaluate the review procedures that the control owners performed including the criteria that the control owners used to identify items for follow up and whether those items were appropriately resolved. (AS 2201.42 and .44) ICFR audit only | AS 2201.42; AS 2201.44 |