- Inspection year
- 2019
- Report date
- 17-Dec-2020
- PCAOB release
- 104-2021-008a
- Audits reviewed
- 12
- Audits w/ Part I.A deficiencies
- 4
- Part I.A deficiency rate
- 33%
- Part I.A deficiencies
- 16
- Part I.B deficiencies
- 6
- Report
- View PDF ↗
Deficiencies (16)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A7 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | For one category of revenue the firm selected for testing an automated application control over the generation of customer invoices and recording of revenue. The firm did not test the configuration of the automated control or perform other procedures that would have provided sufficient appropriate audit evidence that the automated control was designed and operating effectively. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Revenue | The firm selected for testing another control that consisted of the issuer's review of a monthly report and the resulting journal entries that were recorded to adjust revenue. 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 | |
| 3 | Revenue | The firm selected for testing another control that consisted of the issuer's review of a monthly report and the resulting journal entries that were recorded to adjust revenue. The firm did not identify and test any controls over the accuracy and completeness of the report used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Revenue | For another category of revenue the firm selected for testing two controls that consisted of the issuer's reviews of the source documents and transaction reports that were used to record revenue. The firm did not evaluate the specific review procedures that the control owners performed to determine whether the amount to be recorded as revenue was appropriate. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 5 | Intangible Assets | The firm selected for testing a control that consisted of the issuer's review of the assumptions used to estimate the fair value of certain acquired intangible assets for reasonableness. 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 | |
| 6 | Intangible Assets | The firm's approach for substantively testing these assets was to review and test management's process. The firm did not sufficiently evaluate the reasonableness of certain assumptions that the issuer used to value these assets because its procedures were limited to inquiring of management and performing a sensitivity analysis to determine whether changes to the assumptions would result in differences in excess of the firm's established materiality. (AS 2502.26 and .28) Both financial statement and ICFR audits | AS 2502.26; AS 2502.28 | |
| 7 | Intangible Assets | The firm's approach for substantively testing these assets was to review and test management's process. The firm did not perform any substantive procedures to test another assumption. (AS 2502.26 and .28) Both financial statement and ICFR audits | AS 2502.26; AS 2502.28 |
Issuer B5 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer entered into a sales agreement with a new customer that contained various terms and conditions that afforded the issuer and the customer certain rights and obligations. The firm did not perform procedures to evaluate whether revenue from this sales agreement was recognized in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers beyond reading the issuer's revenue recognition memo the sales agreement and the bill of sale. (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 2 | Debt | The issuer amended its convertible debt agreements. The following audit deficiencies were identified: · The firm did not evaluate the amendments to the convertible debt agreements to determine whether the issuer's accounting was in conformity with FASB ASC Subtopic 470-60 Troubled Debt Restructurings by Debtors. (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 3 | Debt | The issuer amended its convertible debt agreements. The following audit deficiencies were identified: · The firm did not identify and evaluate the significance of the issuer's omission of a required disclosure under FASB ASC Subtopic 470-60 regarding its accounting for the amendments as a troubled debt restructuring. (AS 2810.30 and .31) Financial statement audit only | AS 2810.30; AS 2810.31 | |
| 4 | Debt | The firm also identified an error related to the debt discount balance affecting the prior year that the issuer corrected in the current year. The firm did not evaluate whether this correction was in conformity with FASB ASC Topic 250 Accounting Changes and Error Corrections. (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 5 | Derivatives | The firm's approach for substantively testing the fair value of the derivative liability was to review and test management's process. The firm did not perform any procedures beyond inquiring of management to evaluate whether the model the issuer used to estimate the fair value of the derivative liability was appropriate. (AS 2502.26) Financial statement audit only | AS 2502.26 |
Issuer C3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired a business and used an external specialist to estimate the fair value of certain of the acquired intangible assets. The firm's approach for substantively testing the fair value of the acquired intangible assets was to review and test management's process. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of the revenue growth rate assumptions the issuer provided to the external specialist that the specialist used to estimate the fair value of the acquired intangible assets because it limited its procedures to inquiring of management and comparing the growth rates to historical revenue growth information of another company without performing procedures to evaluate whether that company's historical results would be representative of the future revenue growth rates of the acquired business. Further the firm did not evaluate contradictory evidence the specialist included in the valuation report that indicated that the expected revenue growth rate for the issuer's industry was significantly lower than the expected growth rates for the acquired business. (AS 1210.12; AS 2810.03) Financial statement audit only | AS 1210.12; AS 2810.3 | |
| 2 | Business Combinations | During the year the issuer acquired a business and used an external specialist to estimate the fair value of certain of the acquired intangible assets. The firm's approach for substantively testing the fair value of the acquired intangible assets was to review and test management's process. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of the discount rate developed and used by the external specialist to estimate the fair value of the acquired intangible assets because it limited its procedures to inquiring of the specialist regarding data used in determining the discount rate and comparing certain of those data to data for other companies without performing procedures to evaluate whether the data for those companies would be representative of the data for the issuer. (AS 2502.26 and .28) Financial statement audit only | AS 2502.26; AS 2502.28 | |
| 3 | Business Combinations | During the year the issuer acquired a business and used an external specialist to estimate the fair value of certain of the acquired intangible assets. The firm's approach for substantively testing the fair value of the acquired intangible assets was to review and test management's process. The following deficiencies were identified: · The firm did not identify and evaluate the significance of the issuer's omission of a required disclosure under FASB ASC Topic 805 Business Combinations. (AS 2810.30 and .31) Financial statement audit only | AS 2810.30; AS 2810.31 |
Issuer D1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Income Taxes | The firm did not perform any substantive procedures to test the issuer's income tax provision deferred income tax accounts income tax accruals and related disclosures. (AS 2301.08) Financial statement audit only | AS 2301.8 |