- Inspection year
- 2019
- Report date
- 17-Dec-2020
- PCAOB release
- 104-2021-003a
- Audits reviewed
- 26
- Audits w/ Part I.A deficiencies
- 11
- Part I.A deficiency rate
- 42%
- Part I.A deficiencies
- 33
- Part I.B deficiencies
- 4
- 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 A2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm selected for testing a control that consisted of the review of new contracts and certain changes to existing contracts. 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) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | Incorrect opinion |
| 2 | Revenue | The issuer recognized revenue at a point in time. In its evaluation of the issuer's revenue recognition the firm did not evaluate the specifications of the issuer's products and contracts in determining if there were practical limitations on whether the products had an alternative use in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2810.30) In connection with our review the issuer reevaluated its controls over the evaluation of the point in time method of revenue recognition 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. Both financial statement and ICFR audits | AS 2810.30 | Incorrect opinion |
Issuer B6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm identified and tested a compensating control to address deficiencies the issuer identified in controls over revenue recognition. This compensating control involved the issuer's review of a small sample of contracts for appropriate revenue recognition. The firm did not evaluate whether the small sample of revenue contracts subject to the issuer's review was sufficient to address the risk of material misstatement. (AS 2201.68) Both financial statement and ICFR audits | AS 2201.68 | |
| 2 | Accounts Receivable | The issuer initiated and processed sales at numerous business units. The firm designated certain of the issuer's business units as (1) subject to more extensive audit procedures or (2) subject to less extensive audit procedures. With respect to business units subject to more extensive audit procedures the following deficiencies were identified: · The firm did not identify and test any controls that addressed the existence of accounts receivable. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 3 | Accounts Receivable | The issuer initiated and processed sales at numerous business units. The firm designated certain of the issuer's business units as (1) subject to more extensive audit procedures or (2) subject to less extensive audit procedures. With respect to business units subject to more extensive audit procedures the following deficiencies were identified: · The firm sent positive confirmation requests to the issuer's customers for a sample of accounts receivable. For certain items in its sample the responses were returned by email. The firm did not consider performing procedures to verify the source of these responses. (AS 2310.29) Both financial statement and ICFR audits | AS 2310.29 | |
| 4 | Accounts Receivable | The issuer initiated and processed sales at numerous business units. The firm designated certain of the issuer's business units as (1) subject to more extensive audit procedures or (2) subject to less extensive audit procedures. With respect to business units subject to less extensive audit procedures the following deficiencies were identified: · In determining the extent to which audit procedures should be performed at these business units the firm did not evaluate whether (1) specific risks of material misstatement existed at these business units and (2) the risks of material misstatement the firm identified for the business units subject to more extensive audit procedures also applied to these business units such that in combination these risks presented a reasonable possibility of material misstatement. (AS 2101.11 and .12; AS 2201.B10) Both financial statement and ICFR audits | AS 2101.11; AS 2101.12; AS 2201.B10 | |
| 5 | Accounts Receivable | The issuer initiated and processed sales at numerous business units. The firm designated certain of the issuer's business units as (1) subject to more extensive audit procedures or (2) subject to less extensive audit procedures. With respect to business units subject to less extensive audit procedures the following deficiencies were identified: · The relevant controls the firm selected for testing were two entity level controls that included monthly reviews of financial information including accounts receivable for these business units. The firm did not evaluate the review procedures that the control owners performed including the procedures to identify items for follow up and/or the procedures to determine whether those items were appropriately resolved. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 6 | Accounts Receivable | The issuer initiated and processed sales at numerous business units. The firm designated certain of the issuer's business units as (1) subject to more extensive audit procedures or (2) subject to less extensive audit procedures. With respect to business units subject to less extensive audit procedures the following deficiencies were identified: · The firm did not perform any substantive procedures to address the risks of material misstatement related to existence of accounts receivable. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 |
Issuer C6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | The firm selected for testing a control over the review of qualitative factors which are inputs used in determining the general reserve component of the ALL. 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) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Allowance for Credit/Loan Losses | The firm selected for testing a control over the review of qualitative factors which are inputs used in determining the general reserve component of the ALL. The firm did not test the aspect of this control that addressed the accuracy of certain data used in the performance of this control. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 3 | Allowance for Credit/Loan Losses | The issuer used loan charge-offs as inputs to determine the general reserve component of the ALL. The firm selected for testing a control that included the review of loan charge-offs and the evaluation of charge-offs excluded from the calculation. The firm did not evaluate the specific review procedures the control owner performed to evaluate the charge-offs excluded from the calculation. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 4 | Income Taxes | The firm selected for testing a control that consisted of the review of the provision for income taxes including the issuer's review of (1) the effective tax rate reconciliation and (2) considerations regarding the need to record a deferred tax asset valuation allowance. The firm did not evaluate the specific review procedures that the control owner performed to assess the effective tax rate and whether a valuation allowance was needed. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 5 | Income Taxes | The issuer determined that no deferred tax asset valuation allowance was necessary for the current year. The firm did not evaluate the appropriateness of the assumptions the issuer used in its determination. (AS 2501.11) Both financial statement and ICFR audits | AS 2501.11 | |
| 6 | Investments | The issuer recorded the fair value of available-for-sale ('AFS') securities based on the prices it obtained from an external pricing service. The firm selected for testing a quarterly control that consisted of the issuer's comparing for one-fourth of its AFS securities these prices to prices it obtained from another external pricing service. The firm did not evaluate whether the control was appropriately designed to consider whether there were changes to the risk of material misstatement inherent in the population of securities from the issuer's interim testing dates to the issuer's year end. (AS 2201.42) Both financial statement and ICFR audits | AS 2201.42 |
Issuer D6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Going Concern | The firm selected for testing a control over the issuer's review of forecasts that it used in its (1) annual goodwill impairment assessment and (2) evaluation of its ability to continue as a going concern. The firm did not (1) determine the frequency with which the control was performed and (2) 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) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Goodwill | The issuer performed its annual analysis of the possible impairment of goodwill as of an interim date. The firm performed substantive procedures to evaluate certain assumptions underlying the cash-flow forecasts that the issuer used to determine the fair value of its reporting units for this analysis. The firm however (1) evaluated these assumptions at the consolidated financial statement level and not at the reporting unit level and (2) did not evaluate certain other assumptions underlying the cash-flow forecasts including the issuer's ability to carry out specific actions. (AS 2502.26 .28 .31 and .36) Both financial statement and ICFR audits | AS 2502.26; AS 2502.28; AS 2502.31; AS 2502.36 | |
| 3 | Goodwill | The firm selected for testing a control that included the issuer's review of triggering events as potential indicators of goodwill impairment. In its testing of the operating effectiveness of this control the firm did not identify that the issuer's evaluation did not consider certain adverse market conditions and deteriorating financial results that arose before and after year end. (AS 2201.44) Both financial statement and ICFR audits | AS 2201.44 | |
| 4 | Goodwill | The firm did not sufficiently evaluate the issuer's determination that it did not need to test goodwill for impairment between its annual tests because the firm did not identify that the issuer's evaluation did not consider certain adverse market conditions and deteriorating financial results that arose before and after year end. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 | |
| 5 | Going Concern | The firm selected for testing a control over the issuer's preparation and review of the financial statements that included an evaluation by the control owners of the issuer's disclosures related to its ability to continue as a going concern. The firm did not evaluate the specific review procedures that the control owners performed to evaluate these disclosures. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 6 | Going Concern | The issuer experienced certain adverse market conditions and deteriorating financial results that arose before and after year end. The issuer developed a plan to mitigate the effect of these events and conditions. The firm did not obtain sufficient appropriate audit evidence to support certain assumptions used in the issuer's plan including the issuer's ability to carry out specific actions. (AS 2415.07 .08 and .09) Both financial statement and ICFR audits | AS 2415.7; AS 2415.8; AS 2415.9 |
Issuer E4 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Income Taxes | The firm selected for testing a control that consisted of the issuer's review of an analysis of the valuation of deferred tax assets. The issuer adjusted its valuation of certain deferred tax assets based on a study prepared by the issuer's external specialist. The firm did not perform any procedures to test the aspect of this control or any other control that addressed the accuracy and completeness of the data and reasonableness of the assumptions used in this study. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Income Taxes | The firm did not perform any procedures to test the reasonableness of the fair value of certain assets or the tax basis of certain assets and liabilities used in the issuer's external specialist's study that the issuer used to adjust the valuation of certain deferred tax assets. (AS 2501.11) Both financial statement and ICFR audits | AS 2501.11 | |
| 3 | Revenue | The firm selected for testing controls that consisted of the review of (1) journal entries to record revenue and (2) month-end reconciliations. The firm did not identify and test any controls over the accuracy and completeness of certain revenue reports that the control owners used in the operation of these controls. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Revenue | The sample size the firm used in certain of its substantive procedures to test 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 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 F2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer recognized revenue from custom products at a point in time. In its evaluation of the issuer's revenue recognition the firm did not evaluate (1) the specifications of the custom products in determining if there were practical limitations on whether the products had an alternative use and (2) whether the issuer's customary business practice of not enforcing its contractual right to payment on cancelled orders renders this right to be unenforceable in conformity with FASB ASC Topic 606. (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 2 | Accounts Receivable | The firm sent positive confirmation requests to the issuer's customers for a sample of accounts receivable. For certain items in its sample the responses were returned by email. The firm did not consider performing procedures to verify the source of these responses. (AS 2310.29) Financial statement audit only | AS 2310.29 |
Issuer G2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer used a service organization to process certain revenue. The firm selected for testing controls that consisted of the issuer's reviews of analyses supporting revenue deduction accruals for this revenue. The firm did not evaluate the specific review procedures that the control owners performed to assess the accuracy of the sales deduction rates used in the analyses. (AS 2201.42 and .44) ICFR audit only | AS 2201.42; AS 2201.44 | |
| 2 | Income Taxes | The firm selected for testing a control that consisted of the issuer's quarterly review of the provision for income taxes. 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) ICFR audit only | AS 2201.42; AS 2201.44 |
Issuer H2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired multiple businesses. The firm selected for testing controls over the accounting for business combinations including the issuer's reviews of the valuation of certain acquired assets. 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) ICFR audit only | AS 2201.42; AS 2201.44 | |
| 2 | Business Combinations | During the year the issuer acquired multiple businesses. The firm selected for testing controls over the accounting for business combinations including the issuer's reviews of the valuation of certain acquired assets. The firm did not identify and test any controls over the valuation of certain other assets that were also acquired in the business combinations. (AS 2201.39) ICFR audit only | AS 2201.39 |
Issuer I1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm's substantive procedures to test revenue included performing substantive analytical procedures which consisted of comparisons of monthly revenue to the prior-month revenue. These analytical procedures did not provide sufficient appropriate audit evidence because the firm did not (1) determine whether the prior-period amounts could be expected to be predictive of the current-period amounts and (2) include the first month of the year under audit in its analytical procedures. Further the firm used a threshold for investigation of differences that was inconsistent with the desired level of assurance because it did not consider the possibility that a combination of misstatements could aggregate to an unacceptable amount. (AS 2301.08; AS 2305.13 .14 and .20) Financial statement audit only | AS 2301.8; AS 2305.13; AS 2305.14; AS 2305.20 |
Issuer J1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer stored revenue data from its point-of-sale system in multiple databases including a primary database that was used to record data in the general ledger and a redundant database. The firm determined that certain change management and logical access information technology general controls over the primary database were ineffective. The firm identified a compensating control that consisted of a manual comparison of revenue data from the redundant database to the general ledger but the firm did not test beyond inquiry controls that addressed the accuracy and completeness of the revenue data in the redundant database. (AS 2201.68) ICFR audit only | AS 2201.68 |
Issuer K1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm selected for testing a control that consisted of the issuer's review of invoices for certain revenue. The firm did not evaluate the specific review procedures the control owners performed with respect to reviewing the accuracy and completeness of labor hours which were an input into the issuer's calculation of this revenue. (AS 2201.42 and .44) ICFR audit only | AS 2201.42; AS 2201.44 |