- Inspection year
- 2019
- Report date
- 17-Dec-2020
- PCAOB release
- 104-2021-011
- Audits reviewed
- 14
- Audits w/ Part I.A deficiencies
- 7
- Part I.A deficiency rate
- 50%
- Part I.A deficiencies
- 27
- Part I.B deficiencies
- 1
- Report
- View PDF ↗
Deficiencies (27)
Grouped by issuer and in the same order as the PCAOB report, so each item ties back directly to the source.
Issuer A8 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | The issuer used external specialists to (1) determine the fair values of intangible assets acquired in a business combination completed during the year and (2) perform an impairment analysis of certain reporting units including the determination of the fair values of those reporting units. In each instance the estimated fair values were determined using issuer-prepared forecasted cash flows. The firm did not determine the likely sources of potential misstatement related to these forecasted cash flows and did not identify and test any controls that addressed the risks associated with the issuer's development of the forecasted cash flows. (AS 2201.30 and .39) Both financial statement and ICFR audits | AS 2201.30; AS 2201.39 | |
| 2 | Business Combinations | The firm selected for testing a control over the review of the fair value of the acquired intangible assets discussed above and concluded that it was deficient. The firm did not perform sufficient procedures to evaluate the severity of the control deficiency because it did not evaluate the magnitude of the potential misstatement resulting from the deficiency beyond relying on the results of its substantive procedures. (AS 2201.62) Both financial statement and ICFR audits | AS 2201.62 | |
| 3 | Business Combinations | The firm's approach for testing the fair value of acquired intangible assets was to review and test management's process. The firm did not perform any procedures beyond inquiring of management to test the forecasted cash flows after the first forecasted year that were provided to the external specialist to value the acquired intangible assets. (AS 1210.12) Both financial statement and ICFR audits | AS 1210.12 | |
| 4 | Goodwill | The firm selected for testing a control over the review of the issuer's annual goodwill impairment analysis. 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 | Goodwill | The firm selected for testing a control over the review of the issuer's annual goodwill impairment analysis. The firm did not identify and test any controls over the accuracy and completeness of certain information (other than forecasted cash flows which is discussed above) used in the operation of this control. (AS 2201.39) Both financial statement and ICFR audits | AS 2201.39 | |
| 6 | Goodwill | The firm's approach for testing the issuer's annual goodwill impairment analysis was to review and test management's process. The firm did not perform any procedures beyond inquiring of management to test the forecasted cash flows after the first forecasted year that were provided to the external specialist to determine the fair value of the reporting units. (AS 1210.12) Both financial statement and ICFR audits | AS 1210.12 | |
| 7 | Goodwill | The firm's approach for testing the issuer's annual goodwill impairment analysis was to review and test management's process. The firm did not test the carrying value of one of the issuer's reporting units. (AS 1210.12) Both financial statement and ICFR audits | AS 1210.12 | |
| 8 | Revenue | For revenue recognized from certain customers the firm did not perform procedures to determine whether the transactions selected for testing met the revenue recognition criteria. (AS 2301.08) Both financial statement and ICFR audits | AS 2301.8 |
Issuer B3 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired a business and used an external specialist to determine the fair values of the acquired intangible assets. The firm did not determine the likely sources of potential misstatement related to the accounting for the business combination and did not identify and test any controls that addressed the risks associated with the business combination. (AS 2201.30 and .39) Both financial statement and ICFR audits | AS 2201.30; AS 2201.39 | |
| 2 | Business Combinations | The firm's approach for testing the fair value of acquired intangible assets was to review and test management's process. The firm did not test the forecasted cash flows and the accuracy and completeness of other data that were provided to the external specialist. (AS 1210.12) Both financial statement and ICFR audits | AS 1210.12 | |
| 3 | Business Combinations | The firm's approach for testing the fair value of acquired intangible assets was to review and test management's process. The firm did not evaluate the reasonableness of the assumptions developed by the issuer or the external specialist. (AS 2502.26 and .28) Both financial statement and ICFR audits | AS 2502.26; AS 2502.28 |
Issuer C2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Allowance for Credit/Loan Losses | The firm selected for testing a control over the review of assigned loan grades. The loan grades were an important input in estimating the ALL. The firm did not evaluate the specific review procedures that the control owners performed to assess the reasonableness of the assigned loan grades. (AS 2201.42 and .44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 2 | Allowance for Credit/Loan Losses | The sample size the firm used in its substantive procedures to test the reasonableness of the assigned loan grades 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 2315.19 .23 and .23A) Both financial statement and ICFR audits | AS 2315.19; AS 2315.23; AS 2315.23A |
Issuer D5 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 qualitative component of the general reserve. 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 | |
| 2 | Allowance for Credit/Loan Losses | The issuer assigned loan grades to certain of its loans. The loan grades were an important input in determining whether a loan would be individually evaluated for impairment or considered as part of the general reserve. The following deficiencies were identified: · The firm selected for testing a control that consisted of the external loan review ('ELR') of assigned loan grades for certain loans. The firm did not evaluate the specific review procedures that the external loan reviewers performed to assess the reasonableness of the assigned loan grades. (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 assigned loan grades to certain of its loans. The loan grades were an important input in determining whether a loan would be individually evaluated for impairment or considered as part of the general reserve. The following deficiencies were identified: · The firm selected for testing a control that consisted of the review of assigned loan grades for loans not subject to the ELR control discussed above. 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 | Allowance for Credit/Loan Losses | The issuer assigned loan grades to certain of its loans. The loan grades were an important input in determining whether a loan would be individually evaluated for impairment or considered as part of the general reserve. The following deficiencies were identified: · The firm selected for testing a control that consisted of the review of assigned loan grades for loans not subject to the ELR control discussed above. The firm did not test the aspect of this control that addressed the accuracy and completeness of the reports used in the operation of this control. (AS 2201.42 and 44) Both financial statement and ICFR audits | AS 2201.42; AS 2201.44 | |
| 5 | Allowance for Credit/Loan Losses | The issuer assigned loan grades to certain of its loans. The loan grades were an important input in determining whether a loan would be individually evaluated for impairment or considered as part of the general reserve. The following deficiencies were identified: · The sample size the firm used in its substantive procedures to test the reasonableness of the assigned loan grades 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 2315.19 .23 and .23A) Both financial statement and ICFR audits | AS 2315.19; AS 2315.23; AS 2315.23A |
Issuer E2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Investments | The issuer recorded the fair values of securities based on the prices it received from an external pricing service. The firm selected for testing a control that consisted of for a judgmental sample of securities the comparison of these prices to prices obtained from another external pricing service. The firm did not evaluate whether the control was designed to address the risks of material misstatement presented by the securities not subject to the control given the selection method applied by the issuer. (AS 2201.42) Both financial statement and ICFR audits | AS 2201.42 | |
| 2 | Investments | The sample size the firm used in its substantive procedures to test securities 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 2315.19 .23 and .23A) Both financial statement and ICFR audits | AS 2315.19; AS 2315.23; AS 2315.23A |
Issuer F5 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Business Combinations | During the year the issuer acquired a business and used an external specialist to determine the fair values of the acquired intangible assets and property plant and equipment ('PP&E'). The firm's approach for testing the fair value of these acquired assets was to review and test management's process. The firm did not perform any procedures beyond inquiring of management to test the forecasted cash flows that were provided to the external specialist. (AS 1210.12) Financial statement audit only | AS 1210.12 | |
| 2 | Business Combinations | During the year the issuer acquired a business and used an external specialist to determine the fair values of the acquired intangible assets and property plant and equipment ('PP&E'). The firm's approach for testing the fair value of these acquired assets was to review and test management's process. The firm did not perform any procedures beyond inquiring of management to evaluate the reasonableness of the assumptions developed by the external specialist. (AS 2502.26 and .28) Financial statement audit only | AS 2502.26; AS 2502.28 | |
| 3 | Business Combinations | The external specialist determined the fair value of the PP&E using an issuer-prepared asset listing. The firm did not sufficiently test the accuracy and completeness of the listing because it limited its procedures to comparing the asset listing to the PP&E roll-forward schedule and general ledger of the acquired business. (AS 1210.12) Financial statement audit only | AS 1210.12 | |
| 4 | Inventory | The firm's substantive procedures to test certain inventory costs consisted of analytical procedures. The firm did not perform procedures to obtain evidence that the expectations it used would be predictive of the inventory costs as of year end. (AS 2305.13 and .14) Financial statement audit only | AS 2305.13; AS 2305.14 | |
| 5 | Inventory | The firm's substantive procedures to test certain inventory costs consisted of analytical procedures. The firm did not test or in the alternative test controls over the accuracy and completeness of the data it used to develop its expectations. (AS 2305.16) Financial statement audit only | AS 2305.16 |
Issuer G2 deficiencies
| # | Area | Deficiency | Standard | Flags |
|---|---|---|---|---|
| 1 | Investments | The firm did not sufficiently evaluate the reasonableness of the assumptions the issuer used to determine the fair value of certain investments because it limited its procedures to comparing the assumptions used at year end to those used in the third quarter and quantifying the effect of the differences. (AS 2502.26 and .28) Financial statement audit only | AS 2502.26; AS 2502.28 | |
| 2 | Investments | To address an identified fraud risk the firm selected investments for testing that exceeded a monetary threshold. The firm did not perform any procedures to address the fraud risk in the remaining population of investments. (AS 1105.27; AS 2301.13) Financial statement audit only | AS 1105.27; AS 2301.13 |