- Inspection year
- 2019
- Report date
- 17-Dec-2020
- PCAOB release
- 104-2021-010a
- Audits reviewed
- 12
- Audits w/ Part I.A deficiencies
- 6
- Part I.A deficiency rate
- 50%
- Part I.A deficiencies
- 26
- Part I.B deficiencies
- 5
- Report
- View PDF ↗
Deficiencies (26)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm did not perform any procedures to evaluate (1) the terms and conditions of an arrangement under which the issuer recorded revenue and which involved other participants and a counterparty including the method used by the counterparty to allocate consideration to the issuer and other participants and (2) whether the revenue the issuer recognized under this arrangement was in conformity with FASB ASC Topic 606 Revenue from Contracts with Customers. (AS 2810.30) Financial statement audit only | AS 2810.30 | |
| 2 | Revenue | The firm used certain information obtained from the issuer and from outside sources in its substantive testing of revenue but did not perform any procedures to evaluate whether this information was reliable accurate and complete. (AS 1105.04 .06 and .10) Financial statement audit only | AS 1105.4; AS 1105.6; AS 1105.10 | |
| 3 | Investments | To evaluate an investment for potential impairment the firm used information related to transactions involving the investee's stock. The firm did not perform any procedures beyond inquiring of management of the investee to test whether this information was reliable and accurate. Further when determining whether the issuer's conclusion that the investment was not impaired was reasonable the firm did not evaluate potential impairment indicators including (1) the investee's negative operating results unsuccessful attempt to raise capital and workforce reduction shortly after year end and (2) a significant decline in the value of certain assets that were important to the issuer's and the investee's operations. (AS 2301.08; AS 2810.03) Financial statement audit only | AS 2301.8; AS 2810.3 |
Issuer B8 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | For one type of revenue the issuer's system generated customer invoices and recorded revenue once the issuer processed invoices from the manufacturer of its products indicating that customer orders had been completed and shipped. The following deficiencies were identified: · The firm selected for testing a control that consisted of the issuer's review of support for revenue transactions. In testing the operating effectiveness of this control the firm did not test the aspect related to whether the manufacturer's invoices processed by the issuer were consistent with the customers' orders. (AS 2201.44) Both financial statement and ICFR audits | AS 2201.44 | |
| 2 | Revenue | For one type of revenue the issuer's system generated customer invoices and recorded revenue once the issuer processed invoices from the manufacturer of its products indicating that customer orders had been completed and shipped. The following deficiencies were identified: · The firm selected for testing an automated control over the generation of a customer invoice and the recording of revenue once the manufacturer's invoice was processed in the issuer's system. The firm did not obtain an understanding of how the issuer's system was configured to initiate process and record revenue transactions. As a result the firm did not test the configuration of this control or perform other procedures that would have provided sufficient appropriate audit evidence that the control was designed and operating effectively. (AS 2201.34 .42 and 44) Both financial statement and ICFR audits | AS 2201.34; AS 2201.42; AS 2201.44 | |
| 3 | Revenue | For one type of revenue the issuer's system generated customer invoices and recorded revenue once the issuer processed invoices from the manufacturer of its products indicating that customer orders had been completed and shipped. The following deficiencies were identified: · The firm selected for testing a control over manually recorded period-end adjustments to reverse 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 delivery dates obtained from the manufacturer that the control owners used to determine whether adjustments were necessary. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 4 | Revenue | For two other types of revenue the issuer recognized revenue monthly based on sales reported by external parties. The firm selected for testing controls that consisted of the issuer's reviews of the reasonableness of the sales reported by these external parties. 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 | |
| 5 | Revenue | The firm used the sales reported by the external parties in its substantive testing of this revenue but did not perform any procedures to test or (as discussed above) sufficiently test controls over the accuracy and completeness of this information. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 6 | Accounts Receivable | The firm selected for testing controls that consisted of the issuer's reviews of the allowance for doubtful accounts. 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 | |
| 7 | Accounts Receivable | The firm selected for testing controls that consisted of the issuer's reviews of the allowance for doubtful accounts. The firm did not identify and test any controls over the accuracy and completeness of certain data used in the performance of these controls. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 8 | Income Taxes | The firm selected for testing controls that consisted of the issuer's review of income tax accounts. 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 |
Issuer C6 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Deferred Revenue | The firm did not identify and test any controls over information that the issuer manually entered into the revenue systems and used to record service revenue and deferred revenue. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 2 | Deferred Revenue | The firm identified control deficiencies related to controls over the review and approval of program changes for one of the issuer's revenue systems but did not evaluate the severity of these deficiencies. (AS 2201.62) Both financial statement and ICFR audits | AS 2201.62 | |
| 3 | Deferred Revenue | The firm selected for testing controls over the issuer's reviews of transaction reports and the resulting monthly journal entries used to record service revenue and deferred 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 | |
| 4 | Deferred Revenue | The firm used the information manually entered into the revenue systems in its substantive testing of this revenue but did not perform any procedures to test or (as discussed above) sufficiently test controls over the accuracy and completeness of this information. (AS 1105.10) Both financial statement and ICFR audits | AS 1105.10 | |
| 5 | PP&E | The firm selected for testing a control that consisted of the issuer's review of cash disbursements including whether those disbursements met the criteria to be capitalized. The firm did not perform any procedures beyond inquiring of management to test the aspect of this control related to the control owner's evaluation of whether disbursements were properly capitalized. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 6 | PP&E | To substantively test P&E additions the firm selected for testing additions that exceeded a monetary threshold. The firm did not perform any procedures to test the remaining population of P&E additions. (AS 1105.27) Both financial statement and ICFR audits | AS 1105.27 |
Issuer D7 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Investment Securities | The issuer used two service organizations for custody record keeping and the processing of investment transactions and those service organizations used sub-service organizations for certain functions. The service auditors' reports did not address the controls over the sub-service organizations. The firm did not obtain an understanding of and test any controls at the sub-service organizations that were relevant to the issuer. (AS 2201.39 and .B19) Both financial statement and ICFR audits | AS 2201.39; AS 2201.B19 | |
| 2 | Investment Securities | The firm selected for testing a complementary user control that consisted of monthly cash and investment reconciliations but did not test the aspect of this control related to investments. (AS 2201.B22) Both financial statement and ICFR audits | AS 2201.B22 | |
| 3 | Investment Securities | The firm selected for testing a complementary user control that consisted of monthly balance sheet reconciliations. The firm did not identify and test any controls over the accuracy and completeness of the investment statements from the sub-service organizations that the control owners used in the performance of this control. (AS 2201.39 and .B19) Both financial statement and ICFR audits | AS 2201.39; AS 2201.B19 | |
| 4 | Investment Securities | The firm did not perform any substantive procedures to test the valuation of investments. (AS 2502.15) Both financial statement and ICFR audits | AS 2502.15 | |
| 5 | Share-Based Compensation | The issuer granted stock options as payment for services and during the year changed service organizations that it used to value the options. One of the service organizations developed certain assumptions that it used in the valuation of certain options. The firm did not identify and test any controls over the reasonableness of these assumptions. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 6 | Share-Based Compensation | The firm selected for testing controls that consisted of the issuer's reviews of (1) journal entries to record certain stock-based compensation expense (2) quarterly adjustments to certain stock-based compensation expense and (3) disclosures regarding the assumptions used to determine the fair value of certain stock options. 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 | |
| 7 | Share-Based Compensation | An individual involved in the operation of each of the controls discussed above either as a preparer or control owner had privileged access to the service organizations' systems that provided this individual with the ability to make changes to data in those systems. The firm did not identify and evaluate the effect of this individual's access on its conclusions that the relevant controls were designed and operating effectively. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 |
Issuer E1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The firm did not identify and test any controls other than certain cut-off controls over the issuer's revenue transactions for certain types of revenue. (AS 2201.39) ICFR audit only | AS 2201.39 |
Issuer F1 deficiency
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Revenue | The issuer recognized revenue from a contract with a new customer. The firm did not sufficiently evaluate whether collectability of substantially all of the consideration was probable at contract inception because its procedures were limited to inquiring of management and reading an issuer-prepared memorandum. (AS 2301.08) Financial statement audit only | AS 2301.8 |